Supply Chain Terminology

This appendix describes terminology used in the paper when dealing with aspects of the supply chain. The list is not exhaustively complete, some terms will be described as they are employed. Assembly plant: used here as manufacturing entity, transforming a set of components into a product. The term manufacturing plant or simply plant are also used in the same meaning. Demand Forecast: An estimation of the future quantity demanded of a product (in a market). BOM: Bill of Materials. A description of the components (often referred to as parts) that go into the assembly of a product. Customer: User of the products from an assembly plant. The assembly plant will be the customer's supplier. Distribution Center (DC): Entity receiving, stocking and shipping products on their way from suppliers to customer. Downstream: or downstream the supply chain. The direction in which materials flow, e.g. a customer will always be downstream from its suppliers. (Illustrated in fig. .) FGI: Finished Goods Inventory. The area of an assembly plant designated for finished products. Fill Rate: The percent of orders shipped within order due date. Inventory: A quantity of goods and materials, often a stock. Lead Time: The time from an order is sent from a customer to a supplier till the products ordered arrive at the customer. Materials Planning: Is used for both material requirement, or material procurement planning. It signifies the decisions made on the future quantity of components that are required and the quantities to be ordered. The materials planning is based on the production planning.

Metric: A standard of measurement of performance. Multi Echelon Supply Chain: Supply chain with entities on several levels. Fig. shows a multi echelon supply chain, with five levels from left to right. On-Order Materials: (or materials on-order) Materials that are ordered from suppliers, but not yet delivered. Order Backlog: Customer orders received but not shipped. (Often referred to as backlog.) Part: Used for both a part type (say a certain button is part number E-45 in a shirt factory) and an instances of this type (a physical buttons of type E-45). The context will show the meaning. Product Life Cycle: The time from first till last customer order for a product. The order volume will in general increase, level off, and decrease through the life cycle of a product. Production Planning: A decision of the future quantity to produce. This is based on orders from customers, production capacities, often a demand forecast, and the diverse inventory levels in the supply chain. RPI: Raw Product Inventory. The area of an assembly plant designated for components. Safety Stock: The level of inventory desired at any time to counterbalance the many uncertainties met in a supply chain. Stock-out: When at a given moment in a given inventory there is not the quantity of a part or a product that is demanded. A stock-out occurs in a distribution center when there are orders that can not be filled within their due date. A stock-out of a part in an RPI means that production of products containing the part will be interrupted. Supplier: Delivering entity, here usually delivering materials to an assembly plant. In that case the assembly plant will be the supplier's customer. WIP: Work in Process. The inventory under assembly in an assembly plant. Upstream:

or upstream the supply chain, the direction in a supply chain opposite to the flow of materials, e.g. a supplier will always be upstream from its customers. (Illustrated in fig. .) Vertically Integrated: Where the same company owns several levels (echelons) of the supply chain.
In implementing Lean Manufacturing:

We must
decrease cycle times reduce travel distances standardize our processes reduce scrap, rework and waste improve all of our business processes reduce the variation in our schedules provide a constant, steady supply of parts to production, assembly, and test
Creating the Optimal Supply Chain
As global competition and advancing technology render borders irrelevant and link companies more closely, supply chains the network of suppliers, plants, distributors, retailers and others that participate in the sale, delivery and production of goods and services are growing increasingly complex. No longer simply the domain of the

warehouse manager or logistics director, supply chain management is viewed by most companies as a mission-critical element. In this special report, experts from Wharton and Boston Consulting Group (BCG) discuss strategies for maximizing the value of supply chains, avoiding inefficiencies, managing the omnipresent risk of disruption, and evaluating the pros and cons of supply chain enterprise systems.

You Cant Manage What You Cant Measure: Maximizing Supply Chain Value 1
Low-cost country sourcing, outsourcing, customization, globalization and more are adding tremendous complexity to supply chains across the globe. But even as companies are rapidly adopting supply chain management strategies in an effort to keep up, experts from Wharton and BCG report that many still lag when it comes to measuring how well they are doing, and balancing the trade-offs involved in keeping service levels high and costs low.

Avoiding the Cost of Inefficiency: Coordination and Collaboration in Supply Chain Management 5
The process of getting the right product to the right place at the right time at the right price the traditional touchstones of supply chain success remains a challenging and often elusive goal. According to experts from BCG and Wharton, two key supply chain elements that are often taken for granted coordination and collaboration can mean the difference between the merely functioning and the profitable when it comes to procuring goods and services from vendors around the world and delivering them to global consumers as fast and inexpensively as possible.

Flexibility in the Face of Disaster: Managing the Risk of Supply Chain Disruption 9
When it comes to global supply chains, the potential for disruption comes in many packages, from large-scale natural disasters and terrorist attacks to plant manufacturing fires, electrical blackouts, and operational contingencies such as shipping ports too small to handle the flow of goods coming into a country. Experts from BCG and Wharton say that managing supply chain disruptions revolves around two goals: first, to thoroughly understand the potential of identified risks; and second, to increase the capacity of the supply chain within reasonable limits to sustain and absorb disruption without serious impact.

Supply Chain Enterprise Systems: The Silver Bullet? 14

Supply Chain Enterprise Systems information, communication and management technologies that support supply chain functions have quickly become a central element of supply chain management strategy. But, implementing these systems is often a difficult undertaking with an uncertain outcome. For application of supply chain technology to be successful, experts from BCG and Wharton argue that certain elements need to be in place: namely, a clearly defined need based on supply chain strategy, as well as clear expectations about what such technologies can and cannot do for a company.

Benefits of SCM:

Enhanced revenues, tighter cost control, more effective asset utilisation, and better customer service are just the beginning. SEVEN PRINCIPLES OF SCM BY ANDERSEN CONSULTING: 1. Segment customers based on service needs. Companies traditionally have grouped customers by industry, product, or trade channel and then provided the same level of service to everyone within a segment. Effective supply-chain management, by contrast, groups customers by distinct service needs--regardless of industry--and then tailors services to those particular segments. 2. Customise the Supply Chain Management network. In designing their Supply Chain Management network, compa nies need to focus intensely on the service requirements and profitability of the customer segments identified. The conventional approach of creating a "monolithic" Supply Chain Management network runs counter to successful supply-chain management. 3. Listen to signals of market demand and plan accordingly. Sales and operations planning must span the entire chain to detect early warning signals of changing demand in ordering patterns, customer promotions, and so forth. This demand-intensive approach leads to more consistent forecasts and optimal resource allocation. 4. Differentiate product closer to the customer. Companies today no longer can afford to stockpile inventory to compensate for possible forecasting errors. Instead, they need to postpone product differentiation in the manufacturing process closer to actual consumer

demand. 5. Strategically manage the sources of supply. By working closely with their key suppliers to reduce the overall costs of owning materials and services, supply-chain management leaders enhance margins both for themselves and their suppliers. Beating multiple suppliers over the head for the lowest price is out, Andersen advises. "Gain sharing" is in. 6. Develop a supply-chain-wide technology strategy. As one of the cornerstones of successful supply-chain management, information technology must support multiple levels of decision making. It also should afford a clear view of the flow of products, services, and information. 7. Adopt channel-spanning performance measures. Excellent supply-chain measurement systems do more than just monitor internal functions. They adopt measures that apply to every link in the supply chain. Importantly, these measurement systems embrace both service and financial metrics, such as each account's true profitability. First, there are the short-term systems that can handle routine day-to-day transactions like order processing and shipment scheduling. Then, from a longer-term perspective, the technology must facilitate planning and decision making. These systems support such activities as demand planning and master production scheduling to optimally allocate resources. Finally, longer-range information systems must enable strategic analysis by providing modelling and other tools that synthesise data for use in high-level "whatif" scenario planning. These forward-looking systems help managers evaluate distribution centers, suppliers, and third-party service options.

Steps-actions/Phases
Subsequent actions to implement the supply-chain agenda, which Kearney says should be carried out by individual project teams, typically fall into these broad categories: Designing the long-term supply-chain structure to position the company in the right roles in the right supply chains with the right customers and suppliers. Re-engineering supply-chain processes to streamline product, information, and funds flow internally and externally. Reinforcing the supply chain's functional foundation by improving quality and productivity within operational areas such as warehousing, transportation, and fleet management.

Why are organizations concerned about a green supply chain?

Pressing issues such as climate change, water scarcity, energy risk, and natural resource management now affect the buying decisions of multinationals and governments with large supply chains. Buyers want to understand a products impact throughout its lifecycle. They want to know how a product is made and how much energy is used to create and transport it across the globe. They want to reduce risk, save costs, and eliminate waste in the supply chain.