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Intro supply chain
Textbook terms
| Term | Definition |
|---|---|
| Supply Chain | A network of organizations, people, activities, information, and resources involved in moving a product or service from supplier to end customer — spanning raw material sourcing through delivery and reverse logistics. |
| Supply Chain Management (SCM) | The coordination and management of ALL activities across the supply chain to maximize customer value and achieve competitive advantage. SCM is broader than logistics — it includes procurement, manufacturing, distribution, planning, and more. |
| Logistics | The planning, management, and control of how goods, services, and related information move from where they are produced to where they are needed. From Greek "logistikos" |
| Value Chain | The series of value-ADDING activities from product design through delivery and support. Focuses on HOW value is created at each step. Different from supply chain, which focuses on HOW goods MOVE. Memory: Value chain |
| Total Cost of Ownership (TCO) | A financial estimate that includes ALL costs over a product's lifecycle — not just the purchase price. Includes: acquisition, delivery, storage, maintenance, training, quality risk, and disposal/end-of-life costs. Cheapest supplier is NOT always low TCO. |
| Integration | The synchronization of activities, departments, and information across the supply chain to reduce waste and improve efficiency. Pre-1980s supply chains were FRAGMENTED. Integration merged them, saving time and money. |
| Reverse Logistics | The movement of goods FROM customers BACK through the supply chain — for returns, recycling, remanufacturing, or disposal. Growing in importance with e-commerce (return rates 20–30%) and sustainability. This is the FOURTH flow — not financial flow. |
| Bullwhip Effect | The amplification of demand fluctuations as you move UPSTREAM in a supply chain. A small demand change at retail causes increasingly large order swings upstream. Memory: Small flick at the handle |
| Material Flow | The physical movement of goods FORWARD through the supply chain — from raw material supplier through manufacturer, distributor, retailer, to end customer. |
| Information Flow | The BIDIRECTIONAL sharing of data between supply chain partners — orders, demand forecasts, inventory levels, shipment tracking. |
| Financial Flow | The movement of money, credit terms, payments, and financial data through the supply chain. |
| Returns Flow (4th Flow) | The movement of goods FROM customers back through the supply chain. Includes product returns, defective goods, recycling, and end-of-life management. |
| What are the Four Supply Chain Flows? | 1. MATERIAL FLOW → forward | 2. INFORMATION FLOW ↔ both ways | 3. FINANCIAL FLOW ↔ both ways | 4. RETURNS FLOW ← backward. |
| TCO Formula (concept) | TCO |
| What is the difference between a Value Chain and a Supply Chain? | VALUE CHAIN: value-adding activities. SUPPLY CHAIN: movement of goods. |
| Disruption — Natural | Earthquakes, floods, hurricanes, droughts, pandemics. |
| Disruption — Geopolitical | Wars, trade embargoes, tariffs, political instability. |
| Disruption — Supplier Failure | Bankruptcy, quality failures, capacity shortages, facility damage. |
| Disruption — Transportation | Port strikes, fuel shortages, infrastructure failures, driver shortages. |
| Dual Sourcing (Mitigation Strategy) | Using TWO or more suppliers to reduce risk. |
| Supply Chain Visibility | Real-time knowledge of where goods, information, and resources are at any point in the supply chain. |
| EXAM TRAP: Is Logistics the same as SCM? | NO. Logistics is ONE part of SCM. |
| EXAM TRAP: How many Supply Chain Flows are there? | FOUR — including RETURNS. |
| EXAM TRAP: Is the cheapest supplier always best? | NO — lowest price ≠ lowest TCO. |
| EXAM TRAP: Value Chain vs Supply Chain — are they the same? | NO — different focus areas. |
| EXAM TRAP: Does information flow only go one direction? | NO — it flows both ways. |
| EXAM TRAP: Does single sourcing reduce risk? | NO — it increases risk. |
| Memory Aid — MIFR (Four Flows) | M |
| Memory Aid — TCO | "The Complete Outlay" |
| Memory Aid — Bullwhip Analogy | Small flick → huge crack. |
| The Seven Rs of Logistics — List all 7 | 1. Right PRODUCT | 2. Right QUANTITY | 3. Right CONDITION | 4. Right PLACE | 5. Right TIME | 6. Right CUSTOMER | 7. Right COST/PRICE. |
| Right PRODUCT | The exact item ordered — correct SKU, model, and specification. |
| Right QUANTITY | The correct amount ordered — not too many, not too few. |
| Right CONDITION | Goods arrive undamaged and meeting quality specifications. |
| Right PLACE | Delivered to the correct location/address. |
| Right TIME | Delivered on schedule — neither early nor late. |
| Right CUSTOMER | Delivered to the correct recipient/entity. |
| Right COST/PRICE | Delivered at the agreed and acceptable cost — no surprise charges. |
| Procurement | The STRATEGIC process of acquiring goods, materials, and services from reliable suppliers. |
| Purchasing | The TRANSACTIONAL day‑to‑day component of procurement (issuing POs, tracking orders, receiving goods). |
| What is the difference between Procurement and Purchasing? | PROCUREMENT is strategic; PURCHASING is operational. |
| Four Pillars of Procurement Importance | 1. Cost control | 2. Quality assurance | 3. Relationship management | 4. Innovation. |
| Third‑Party Logistics (3PL) | External company that operates logistics functions (transportation, warehousing, fulfillment). |
| Fourth‑Party Logistics (4PL) | Strategic integrator that manages the entire supply chain, including 3PLs. |
| What is the difference between a 3PL and a 4PL? | 3PL OPERATES logistics; 4PL ORCHESTRATES the entire supply chain. |
| Raw Materials Inventory | Inputs purchased from suppliers awaiting use in production. |
| Work‑in‑Progress (WIP) Inventory | Partially completed products currently being processed. |
| Finished Goods Inventory | Completed products ready for sale or shipment. |
| MRO Inventory | Maintenance, Repair, and Operations supplies that support production but are NOT part of the final product. |
| What are the four types of inventory? | Raw Materials, WIP, Finished Goods, MRO. |
| Safety Stock | Buffer inventory held to protect against unexpected demand spikes or supply delays. |
| Reorder Point | The inventory level that triggers a new purchase order. |
| Just‑in‑Time (JIT) | Inventory strategy where materials arrive ONLY when needed — minimizes holding costs but increases stockout risk. |
| Procurement Process — Steps | 1. Identify need → 2. Define specs → 3. Identify suppliers → 4. RFQ/RFP → 5. Evaluate/select → 6. Negotiate/contract → 7. Issue PO → 8. Receive/inspect → 9. Verify invoice/pay. |
| Logistics Cost Reduction Factors (CITE) | Consolidation, Integration, Technology, Education. |
| Inventory Trade‑Off | Too much |
| EXAM TRAP: What is the 7th R of Logistics? | Right COST/PRICE. |
| EXAM TRAP: Do 3PLs only do transportation? | NO — they handle warehousing, fulfillment, customs, returns, etc. |
| EXAM TRAP: Does JIT eliminate stockouts? | NO — it increases stockout risk. |
| EXAM TRAP: Are there 3 or 4 inventory types? | FOUR — don’t forget MRO. |
| EXAM TRAP: Is procurement strategic or operational? | Procurement |
| Memory Aid — Seven Rs Mnemonic | “Really Clever People Quite Thoroughly Cultivate Results.” |
| Memory Aid — Procurement vs Purchasing | “Procurement is the PLAN. Purchasing is the PAPER (PO).” |
| Memory Aid — Inventory Types (RWFM) | Raw → WIP → Finished → MRO. |
| Memory Aid — CITE | Consolidation, Integration, Technology, Education. |
| Five Major Forces Driving Supply Chain Change | 1. Technology | 2. Globalization | 3. Consumer expectations | 4. Sustainability | 5. Geopolitics/Regulation. |
| Retail Evolution — T. Eaton Company | Founded 1869; bankrupt 1999 due to failure to adapt to retail and supply chain changes. |
| Retail Evolution — Sears Canada | Once dominant; strong catalogue distribution; bankrupt 2017 after losing to Walmart and e‑commerce. |
| Retail Evolution — Walmart Canada | Entered Canada March 17, 1994 by acquiring 122 Woolco stores; transformed Canadian retail through superior supply chain. |
| Retail Evolution — Target Canada | Entered 2011 by acquiring 220 Zellers leases; failed due to supply chain issues (empty shelves, bad data); bankrupt January 2015. |
| Retail Evolution — Amazon | Digital evolution of catalogue retail; uses robotics, AI, predictive inventory, and its own delivery network. |
| Critical Dates — Retail Evolution (All) | 1869 Eaton’s founded | 1994 Walmart enters | 1999 Eaton’s bankrupt | 2011 Target enters | 2015 Target bankrupt | 2017 Sears bankrupt. |
| BRIC Countries — Overview | Brazil (agriculture) | Russia (energy) | India (IT + manufacturing) | China (manufacturing hub). |
| VISTA Countries — Overview | Vietnam (manufacturing) | Indonesia (resources) | South Africa (mining/gateway) | Turkey (logistics crossroads) | Argentina (agriculture). |
| EXAM TRAP: BRIC vs VISTA — are they the same? | NO — different groups. BRIC |
| EXAM TRAP: Who entered Canada first — Walmart or Target? | Walmart (1994). Target entered much later (2011). |
| EXAM TRAP: What year did Eaton’s go bankrupt? | 1999. |
| EXAM TRAP: Who offers the SCMP designation? | Supply Chain Canada. |
| EXAM TRAP: Is cold chain only for food? | NO — also critical for pharmaceuticals (vaccines, insulin, biologics). |
| Supply Chain Canada | National association offering the SCMP designation. |
| CIFFA | Canadian International Freight Forwarders Association; offers the CIFF designation. |
| APICS / ASCM Designations | CPIM (Planning & Inventory) and CSCP (Supply Chain Professional). |
| Five Core Supply Chain Functions | Procurement | Production | Logistics | Planning | Customer Service. |
| Supply Chain Across Industries — Retail/E‑commerce | Priorities: fast delivery, accurate inventory, efficient picking. Risks: demand spikes, last‑mile delays, high returns. |
| Supply Chain Across Industries — Healthcare/Pharma | Priorities: cold chain, compliance, zero stockouts. Risks: expiry, audits, supply disruptions. |
| Supply Chain Across Industries — Manufacturing | Priorities: reliable suppliers, efficient production, minimal downtime. Risks: shortages, breakdowns, defects. |
| Memory Aid — Five Forces (TGCSG) | Technology, Globalization, Consumer expectations, Sustainability, Geopolitics. |
| Memory Aid — BRIC | “BRICs build big economies.” |
| Memory Aid — VISTA | “Visit Interesting Supply‑chain Territory Abroad.” |
| Memory Aid — Five Core SC Functions (PPLPC) | Procurement, Production, Logistics, Planning, Customer Service. |
| Four Modes of Transportation — Overview | Cost ranking (cheapest → most expensive): OCEAN → RAIL → ROAD → AIR. Speed ranking (fastest → slowest): AIR → ROAD → RAIL → OCEAN. Cheapest |
| Air Freight — Benefits and Limitations | BENEFITS: Fastest, secure, low theft, reduces inventory, global reach. LIMITATIONS: Most expensive, weight/size limits, high carbon footprint. BEST FOR: Pharma, electronics, luxury goods, perishables, urgent shipments. |
| Ocean Freight — Benefits and Limitations | BENEFITS: Cheapest per unit, handles huge volumes, global reach, any cargo type. LIMITATIONS: Slowest, port congestion, weather delays, requires port infrastructure. BEST FOR: Bulk goods, consumer goods, raw materials, furniture. |
| Rail Freight — Benefits and Limitations | BENEFITS: Cost‑effective long distance, fuel‑efficient, reliable, handles heavy/oversized loads. LIMITATIONS: Fixed routes, slower for short distances, requires truck for final mile. BEST FOR: Coal, grain, potash, lumber, intermodal containers. |
| Road/Truck Freight — Benefits and Limitations | BENEFITS: Most flexible, door‑to‑door, fast for short/medium distances, many equipment types. LIMITATIONS: More expensive long distance, traffic/weather delays, driver shortages. BEST FOR: Retail goods, food, construction materials, regional distribution. |
| Intermodal Transportation | Using two or more transport modes with standardized containers (e.g., ocean → rail → truck). Enabled by containerization. |
| Containerization | Standardized 20ft/40ft containers that move seamlessly between ships, trains, and trucks. Invented by Malcolm McLean (1956). Revolutionized global trade. |
| Comparative Advantage | Countries should specialize in goods where they have a relative cost/quality advantage and trade for others. |
| Customs Broker | Licensed professional who handles import/export documentation, duties, and customs clearance. “Broker does the BORDER paperwork.” |
| Freight Forwarder | Company that arranges logistics for international shipments — books carriers, prepares documents, coordinates multimodal transport. “Forwarder arranges the FREIGHT movement.” |
| EXAM TRAP: Customs Broker vs Freight Forwarder — same role? | NO. Broker handles customs; Forwarder handles freight movement. |
| CUSMA | Canada‑United States‑Mexico Agreement; replaced NAFTA in 2020; reduces tariffs across North America. |
| Five Questions for Global Supply Chain Strategy | 1. Where to procure? | 2. Where to manufacture? | 3. Where to sell? | 4. How to transport? | 5. Where to store/distribute? Memory: Buy, Make, Sell, Move, Store (BMW‑MS). |
| Benefits of Global Supply Chains | Lower production costs, access to skills, access to raw materials, larger markets, economies of scale, competitive advantage. |
| Challenges of Global Supply Chains | Longer lead times, complexity, higher disruption risk, IP risk, cultural barriers, currency fluctuation, ethical sourcing concerns. |
| Digital Transformation in Supply Chains | Using technology (cloud ERP, IoT, EDI) to modernize supply chain operations. |
| Internet of Things (IoT) in Supply Chains | Devices with sensors that transmit real‑time data (location, temperature, humidity). Example: DHL SmartSensor. |
| Artificial Intelligence (AI) in Supply Chains | AI improves forecasting, risk management, route optimization, and automated procurement. |
| Automation and Robotics in Supply Chains | Warehouse robots, AMRs, conveyor systems, autonomous trucks, drones. Benefits: speed, accuracy, 24/7 operation. |
| Sustainability and Green Supply Chains | Reducing carbon footprint through green logistics, cleaner transport modes, circular economy, ethical sourcing. |
Created by:
kfroeli4