Module 1

1- Competitive priorities Cost, quality, speed, and flexibility

Companies, and supply chains more specifically, are very often
competing in these four areas. As a result, tracking performance in cost,
quality, speed, and flexibility is vital to knowing whether the company is
meeting its goals in the present and working towards better performance
in the future.
Cost: materials, energy, wages, transportation, rent
Quality: Design, reliability, consistency, materials and fabrics
Speed: Delivery, on-time, innovation time
Flexibility: customization, size of order, design

2- Value
Value is the ratio of output purchased divided by inputs used to
purchase the product or service. Customers seek value. Value can be
increased by giving the customer more for the same price, or by giving
them the same amount at a lower price:

What did I buy?

----------------------------
What did it cost me?
 3- Productivity
The ratio of outputs to inputs. From a manufacturing perspective
companies seek to maximize the amount of outputs that can be produced
and delivered to market while minimizing the required inputs.
Productivity is a relative term, so typically it can only be compared to
the productivity of periods that precede the present productivity.

4- Downstream Supply Chain

In a supply chain, the direction that points toward the end consumer.
Explained: In the provided supply chain illustration, the downstream
direction is to the right.
In a company an executive that works in downstream supply chain
management finds ways to get goods and services closer to the customer
in an effective and efficient manner. Downstream activities might
include: delivering goods from a manufacturer to a distributor, suppliers
(S1) working to get parts prepared in time for manufacturers, distributors
developing relationships with retailers so they can better understand the
retailers supply chain needs.
5- Upstream Supply Chain
In a supply chain, the direction that points toward the suppliers.
Explained: In the provided supply chain illustration, the upstream
direction is to the left.
In a company an executive that works in upstream supply chain
management might be responsible for: ensuring that empty boxes at the
retail level are returned to the distributor for reuse, developing
relationships with a companys first-tier suppliers in order to better
communicate the needs of the present and the future.
6- 1st tier suppliers
A companys direct suppliers. A firm that directly provides goods and/or
services to a company.
7- 2nd tier suppliers
A firm that provides goods and/or services to a companys first-tier
supplier.

8- Reverse Logistics
The management of products that flow backward in the supply chain,
away from the consumer and back in the direction of manufacturers.
(The management of materials moving upstream in the supply chain)

9- Supply Chain Management

The effective and efficient integration of the suppliers, manufacturers,
transportation organizations as well as the other parties responsible for
collectively bringing products and services to market.

10- Procurement (purchasing)

The branch of an organization responsible for acquiring materials,
equipment, products, and services. This would entail finding
suppliers, choosing the supplier that offers the best value,
negotiating the terms of the purchase, placing orders, and
developing long-term relationships with suppliers.
 11- Operations
The branch of the supply chain responsible for making business
processes effective and efficient. In essence, operations seeks to help the
organization create high quality products and/or services using the
fewest resources possible
12- Logistics
The branch of the supply chain responsible for developing the
transportation itinerary and finding the appropriate transportation and
storage partners to successfully navigate the flow of materials from the
point of origin to the final destination.
 Module 2
1- Safety Stock (buffer stock)
Inventory kept to account for variation/uncertainty of
demand.
2- Pipeline Inventory
Inventory in transit between two points. Those two points
establish the pipeline. So the inventory does not necessarily
need to be on a truck or train.
3- vertical Integration
The act of a company taking on additional supply chain
responsibilities that were formerly done by outside parties.
There are two classes of vertical integration:
4- Forward integration Taking over supply chain
responsibilities formerly performed by downstream supply
chain partners. (Example: A bakery decides to open up a
sandwich shop. Rather than just selling bread to sandwich
shops, they now forward integrate and use their own bread
for their sandwich shop)
5- Backward integration Taking over supply chain
responsibilities formerly performed by upstream supply chain
partners. (Example: A bakery decides to purchase a flour
company. Rather than purchase flour from a flour supplier
they now use their new flour branch to both sell flour to other
companies (including competitors) and they also use the
flour in their own bakery.
6- Pros of High Inventory Levels
Higher levels of customer service - Having inventory will help
a company address their immediate demand for product
Quantity discounts may be possible - Lower per unit costs
Fewer orders will need to be placed - Possibly lower
ordering costs and transportation costs
Greater security against unexpected demand variability
 7- Pros of Low Inventory Levels

Less storage space required Costs of holding inventory

may be lower
Lower chance of inventory obsolescence and shrinkage
Less inventory typically means less materials handling
requirements
Less money invested in inventory means more money
available for other investment opportunities

8- Economic Order Quantity (EOQ)

EOQ is the lot size (Q) that will minimize total annual inventory
cost (TC); it is therefore seen as the optimal lot size.
EOQ can also be described as the lot size where annual holding
cost is equal to annual ordering cost
 9- Choosing a Supplier
What are some of the common issues buyers consider when they
weigh new suppliers?

Consumer needs Do they have a part that will make your

product more desirable to your customer?
Cost, Quality, Speed, and Flexibility What do you and your
customer want? Are your goals similar to their goals?
Technological capability Do they offer a product or service no
one else can offer?
Location Will the distance between their facility and your facility
significantly increase lead time or increase supply chain risk? Will
transportation and tariffs pose cost challenges?
Information Technology system Will their system and your
system be able to share data selectively and securely?
Ability to innovate Do they have money to invest in R&D? Are
they interested in innovating? Your product cant improve if their
parts do not improve.
Capacity Potential Is their present capacity or their potential for
growing capacity sufficient to help you meet your growing
demand?
2nd and 3rd tier suppliers If we look farther downstream in the
supply chain are we comfortable with the risks or opportunities
their suppliers may pose? Are they willing to let us develop a
relationship with their suppliers?
Reliability How often do they actually deliver on their promises?
When they cant meet our deadlines what is the typical outcome?
Service In addition to great products, what else do they offer? If
we are buying a commodity where the market drives the price,
what does this supplier offer to differentiate themselves from their
competition?
 Module 3
1- Line Flow Strategy
Demand: Standard Items, High Volumes, Static Industry
Layout: Product Focused/Line Flow Layouts
Manufacturing system: Assembly Lines, Continuous Flow Systems
Make-to-stock systems
2- Flexible Flow Strategy
Demand: Customized Items, Low Volumes, Dynamic Industry
Layout: Process Focused/Flexible Flow Layouts
Manufacturing system: Job Shops
Make-to-order systems
3- Hybrid Strategy
Demand: Moderation (Customization, Changes, Industry)
Layout: Hybrid Layouts
Manufacturing system: Group Technology (Cellular) Layout
Possibly an Assemble-to-order system
4- Cycle time (c) Assembly lines work to fulfill a given demand
during a certain period of work time (operating time). Cycle time is
the pace at which product must move through the assembly line in
order for the assembly line to keep pace with demand.
It is very important to note that the cycle time tells a manager the
maximum amount of task time that can be put into a single workstation.
 5- Bottleneck:
The largest workstation is your slowest workstation. In the given
example the bottleneck would be WS3 with 50 seconds. This
workstation limits the output of the entire assembly line. It is the
weakest link

6- Established Channels of Distribution

Channels of distribution represent the chain of organizations that help
bring a product into the hands of the end user. This might include
packaging companies, delivery companies, warehouses, distribution
centers, and perhaps even suppliers. So, established channels of
distribution implies that a certain chain of organizations have an
established history of working together and perhaps coordinating supply
chain actions. This advanced relationship might imply that transactions
occur regularly and perhaps more fluidly.
7- Established Supplier Base
A companys supplier base is the collection of companies from which an
organization presently purchases products and/or services. So, an
established supplier base implies that an organization has a group of
companies with which they have developed a working relationship. This
advanced relationship might imply that transactions occur regularly and
perhaps more fluidly.
Explained: Similar to established channels of distribution, having an
established supplier base means that accepted business practices
between you and upstream supply chain partners allow for a certain level
of comfort and familiarity in day-to-day operations.
Again, if an established manufacturer moves to another part of the
country or a different part of the world, the manufacturer may need to
consider if they want to find new suppliers that are closer to the new
location.
As with established channels of distribution, a new company may
consider the value of locating their new manufacturing facility in a
region with other manufacturers that use similar types of suppliers
 Module 4
1- Cargo Classifications
Three of the primary classifications of cargo are:
Bulk Cargo that is loose and free flowing. Bulk cargo is not in any
type of bag, box, or packaging vessel. As such, bulk cargo is typically
loaded and unloaded by being pumped, scooped, shoveled, etc.
Break bulk Cargo that is packaged (box, bottle, can, etc.) and/or
secured on a pallet. This type of cargo can then be placed inside of a
standardized container or a truck trailer.
Neo-Bulk Typically these are large items that do not quite fit into
either the bulk or break bulk categories. This might include vehicles,
logs, and livestock. Neo-bulk items are typically not moved in
standardized containers.
Explained: While every item that is transported has its own individual
characteristics, these three cargo classifications help logisticians
understand some of the likely issues related to their cargo. Moving large
amounts of rock salt (bulk cargo) would likely require very different
logistics considerations versus moving packaged orange juice (break
bulk) ready for shipment to a grocery store. Try and think of things in
your neighborhood that would fall under each of the three cargo
categories.
2- Dunnage
bubble wrap, Styrofoam popcorn, small inflatable airbags used in
boxes, large inflatable bags used in shipping containers
 3- Cross-docking
Distribution of goods from an upstream supplier to a downstream
customer through a distribution center with minimal handling and
storage times typically less than 24 hours.
Explained: Wal-Mart has thousands of retailers and thousands of stores.
How can Wal-Mart quickly get products from suppliers to stores using
the smallest number of distribution centers and minimal logistics
resources? Cross-docking!
By tying together supplier data, store data, DC data, trucking data, and
sales data, Wal-Mart can have the right amount of trucks, filled with the
right products, arrive at the DCs when needed. Those products can be
quickly unloaded, sorted, and then prepared for loading on outbound
trucks headed for Wal-Mart stores. For big box retailers, cross-docking
is an essential part of effective and efficient supply chain management.
Cross-docking facilities require dozens of garage doors on either side of
the facility: doors on one side of the facility would all be inbound truck
doors, the doors on the other side of the DC would be outbound truck
doors. A single cross-docking facility may feed inventory to over 75 big
box stores. A well-run cross docking facility is a combination of
excellent planning, modern technology and machinery, and motivated
human labor.

4- Warehouse and DC Services

While storage and distribution are primary functions of warehouses and
DCs, modern storage and distribution facilities may also provide any
number of additional supply chain value-added activities. Below is a
short list of some of the services offered by storage and distribution
activities.
Picking and packing Think Amazon.com. Certain facilities store
items for online retailers and then quickly pick, pack, and label a
shipment before it is put on a truck headed for a customer. Doing this
well being fast, accurate, and cost effective - is not as easy as it
sounds.
Assembly Shipping pre-assembled tables or bicycles and then storing
them in a facility is not ideal. Shipping these types of items boxed and
unassembled is typical, but consumers may want the item to arrive to
their home assembled and ready for use. As a result, some storage and
distribution facilities may offer convenient and high quality assembly
services at additional cost to either the retailers or the retailers
customers.
Postponement Sometimes retailers offer customization opportunities.
Consider the table from the as assembly example above. Suppose that
the customer could choose from 5 different colors. Rather than having
inventory of those tables in 5 different colors, tables could arrive to the
facility unpainted. If the facility offers postponement services, the
company could wait until orders were received and then have the table
painted. No guessing of demand for each color. Instead, every table can
be sold in the color the customer desires.
Quality inspections Items can be damaged in transport, during
handling, and even while on the shelf. Damaged or defective items can
also sneak their way through the supply chain. Some facilities will offer
additional services designed to catch quality issues before they impact
the final customer.
 Management of packaging materials Boxes, pallets, and other types
of packaging can be rather expensive. Modern supply chains do their
best to reuse these items as often as possible. To aid this endeavor, some
facilities are responsible for recovering, handling, and even distributing
packaging materials throughout the supply chain.
Disposal, disassembly, and/or recycling of unwanted or defective
products - What happens to items that are broken, returned, or unsold?
Some facilities focus on dealing with items that have little or no use
Repair or refurbishing of defective product If items can be repaired or
re-sold, some facilities will provide services to prepare those products
for re-sale.

5- 5 Major Modes of Transportation

There are five recognized modes of transportation in the world of
logistics. Four are rather obvious and one might surprise you:
Road
Rail
Ocean/Water
Air
Pipeline Used only for liquids or items that can be

The key question for each of the four most popular modes is knowing
when each mode is most appropriate. This requires an understanding of
the strengths and weaknesses of each mode. In looking at the
comparison below, be mindful that the information relates mostly to the
United States. Each country has a different logistics infrastructure so
perceived strengths and weaknesses can vary greatly abroad.
ROAD
Primary Strengths: Fast (2nd fastest mode of transport), Cheaper than
air. High flexibility (roads are everywhere, roads can take you from one
mode to another), this is a highly competitive market so costs may be
reasonable and shippers need to be reliable to survive. Typically, a vital
component in intermodal transport. Gets your product right into the
customers hands.
Primary Weaknesses: Weather, traffic, and crime may pose dangers and
delays. Requires lots of licensed and reliable drivers. Fuel costs
fluctuations. Rules and regulations may quickly change from one region
to the next.
When to use: Road is not the fastest nor the cheapest. It is neither the
most expensive nor the slowest. Road is thus a reasonable combination
of a number of important transportation attributes. Most cargo moves
using at least a little bit of road transport. The bigger question is : When
should road be the most prevalent mode of transport? Well, if the
shipment needs to be shipped rather quickly, at a reasonable cost,
directly into the hands of a customer it would likely be a good idea to
use road transport.

RAIL
Primary Strengths: Can handle heavier loads than road. Better for longer
distances than road. Cheaper than road transport. Works well in
conjunction with intermodal ocean and/or road transport.
Primary Weaknesses: Slow. Rails are not as easily accessible and
available as roads. Loss can be higher due to vibrations during transport.
Not a very competitive industry so reliability can be low. Getting
product directly to customer using only rail is very difficult.
When to use: Good for heavy and/or bulky shipments that do not need
speedy delivery. Also good for items with low value/weight ratios. A
good intermodal option for lengthy domestic shipments where speed is
not vital.
OCEAN/WATER
Primary Strengths: Low cost per mile for large, bulky, or heavy
shipments. Almost anything can be shipped via ocean vessel. Works
well in conjunction with intermodal rail and/or road transport.
Primary Weaknesses: Very slow. Reliability of shipment can be low.
Due to lengthy shipments, more exposure to the elements, thieves, and
hazardous conditions. Getting product directly to customer using only
ocean shipment is very difficult.
When to use: Excellent for large and bulky international shipments that
require low transportation costs, but do not require quick shipment.

AIR
Primary Strengths: Fastest mode of transport. Minimal exposure to the
elements, theft, and hazardous conditions. Can work well when linked
with road transport in getting items into the hands of the customer.
Primary Weaknesses: Extremely expensive. Not easily linked with rail
and ocean. Cannot accommodate standardized containers. Requires
accommodating airports on both ends of a shipment.
When to use: An attractive option with items that have a high
value/weight ratio. Especially useful when short lead times and low
inventory levels are valued. In addition, useful when security and
damage are significant concerns.
6- Controlled Atmosphere (CA)
Often called reefers because they are refrigerated, modern CA
containers can also control humidity, composition of the air, and
pressure
7- Intermodal
When cargo is moved from one vehicle or vessel to another vehicle or
vessel without directly handling the cargo. Typically the cargo would be
stored inside of a standardized container or a truck trailer. The
standardized container can swiftly and securely be moved from a ship to
a rail car, from a rail car to a truck chassis, etc.
8- TEU
Stands for Twenty-foot Equivalent Unit. This is how containerized cargo
is measured. One 20-foot container is equal to 1 TEU. One forty-foot
container is equal to 2 TEUs. TEUs are used to measure a number of
things including:
Amount of break bulk cargo imported or exported into or out of a
country. (Not necessarily restricted to break bulk cargo.) Example: Last
year Dingo Digital imported 3500 TEUs into the USA.
Size of a container ship. Example: That ship that just docked is
American President Lines 14000 TEU container ship.
The amount of cargo that enters or leaves a shipping port. Example: In
2011 the Port of Dubai handled over 13 million TEUs.
Since a majority of the containers on earth are actually 40-foot
containers, some logisticians choose to use FEU, which of course stands
for forty-foot equivalent unit.

9- Less-than-truckload Shippers more commonly referred to as LTL

Shippers If a company has a reasonable amount of goods going
to a single location, but not enough goods to fill an entire truck or
container they have an LTL shipment. Again, in the case of a 20 or
40-foot container, this might be referred to as an LCL shipment
(Less-than-container-load)
From our examples above, Car Parts Inc. would require the
transportation services of an LTL shipper.

10- Truckload Shippers more commonly referred to TL

Shippers These types of shippers specialize in moving large
amounts of goods, enough to fill an entire truck. If you are dealing
with 20 or 40-foot containers instead of a truck, the term CL
Shipper can also be used, where CL stands for container-load.
On some occasions it is possible that you may see the term FTL, which
stands for full container load. In general, there is no difference between
TL and FTL.
From our examples above, Apple would require the transportation
services of a TL shipper.
Module 5
1- Goal of waiting line management
Balance the cost paid by the customers (time) with the cost paid by the
company (money paid to maintain the system)

2- Planogram
A map of where every product goes on a retail store shelf. (See picture
that follows)
Explained: Rather than have each store manager figure out which items
go on which shelf, chains can develop planograms for each product
category. This creates incredible efficiencies and also creates continuity
for the customer experience from one store in that chain to another. So,
while shampoo may be in a different part of Wal-Mart from one location
to the next, the shampoo shelves will likely look identical at each of the
similarly sized locations.

3- Balking When a potential customer sees the line, but never joins
the line because they think it looks too long and/or too slow.
4- Reneging When a customer joins the line, gets frustrated and
leaves the line

5- Last mile
In supply chain the last mile typically refers to the portion of the supply
chain between the final inventory holding facility and the end consumer.
 6- Omni-channel Retailing
Retailers that are fully committed to engaging customers via catalogs,
phone calls, websites, email, internet chatrooms, social media sites or
mobile apps, and of course also in stores. True omni-channel retail
readiness would require companies to have a very strong presence in the
many channels they choose to meet customers.

7- Vendor Managed Inventory (VMI)

An arrangement where retailers allow vendors to monitor in-store
inventories, initiate orders/shipments to the store when inventories are
low, and also bring the items into the store and onto the shelf.
Explained: The idea here is that rather than having a retail store try to
monitor every item in their stock and understand the supply chain
preferences (order sizes, lead times) of all of their vendors, instead just
allow vendors to monitor the inventories on your shelf. The vendor can
then initiate orders at the right time and in the right size. By letting the
vendor bring the items into your store and put them on your shelf the
vendor can ensure their products are appropriately displayed and they
can even gain a better understanding of the store environment and the
customers they serve.
 Module 6
1- Push System
A system in which consumer demand is known and expected. As a result
a supply chain will preemptively buy materials, manufacture finished
goods, and even deliver them to a store or a picking and packing facility
where consumers can buy them at a later date. Inventory is pushed
toward the consumer in anticipation of consumer demand.
Explained: This system works well when product innovation is slow and
thus production techniques are rather static. It will also require that
consumer demand be fairly well understood. Using the example
provided in the opening (Casual Dining Restaurant), an example of
items likely produced using a push strategy would be the BBQ ribs,
perhaps even the mashed potatoes, and the sliced fruit. These items were
all ready in advance of the customer arriving. The problem, though, is
that if too many customers want BBQ ribs, then the restaurant will not
be able to meet demand since creating another batch of ribs would take
too long.
Returning to the more general explanation, the fairly stable demand
along with the stability in the supply chain result in a system where
materials can be bought in bulk at low per unit prices, production
facilities can achieve economies of scale in line flow production
systems, and bulk deliveries to large sales facilities can also bring
economies of scale. Characteristics of this system might include:
High finished goods demand readily available for buyers
Opportunities to take advantage of quantity discounts
End-items are standardized with little opportunity for customization
 Vulnerable to obsolescence of inventory, high holding costs, and poor
demand forecasts that may result in stockouts or massive overstocks.

2- Pull System
A system that is activated by consumer demand. As a result a supply
chain will not make and store finished goods inventory. Instead, the
supply chain will wait for the consumer to place a specific order and
only then will the supply chain react by perhaps buying raw materials
and/or parts, and then assembling the desired goods, before quickly
delivering them to the consumer. Inventory is pulled by the consumer
by communicating a specific desire to those in the supply chain.
Explained: This system works well when products innovate at a fast
pace or consumer desires are not standardized. The more variation in
consumer demand, the more likely an organization might be to adopt a
pull strategy. Using the example provided in the opening (Casual Dining
Restaurant), an example of an item likely produced using a pull strategy
would be the filet mignon. While the raw steak was likely available in
inventory, the steak was not cooked until the specific order was placed.
Only then could the steak be served fresh and to the specific desires of
the consumer.
Here an organization would likely carry raw materials inventory that
might be used to produce a range of finished goods. Perhaps the steak
could be served as the main part of a steak dish; perhaps it could be used
on a steak sandwich, or perhaps even as a topping on a steak salad. The
key element here is customization. The customer gets what they desire
and the raw material is used to satisfy a specific customer order.
Characteristics of this system might include:

High raw materials inventory readily available to produce a specific

consumer order
End-items are very likely offer a range of customization options
Vulnerable to sudden increases in demand, poor forecasts that may
result in poorly planned production systems/facilities

3- Postponement
A system that combines push and pull - pushing product elements that
are considered standard and then allowing customers to pull product
elements that can be customized. Those product elements that are
standard will be produced in advanced, and then final production will be
delayed (postponed) until the consumer places an order that specifies the
customized elements.
Explained: Subway Sandwiches is a good example of a company that
takes advantage of postponement. This organization bakes sandwich
bread long before customers arrive. In addition, meats, cheese, and
vegetables have been pre-cut and pre-sliced. Thus when customers
arrive they nearly need to ask for the appropriate sandwich items to get
put together.
In this example, the baking of bread, and slicing of meats, cheeses and
vegetables are all push elements of the system. Since Subway knew
customers would want some combination of those times on many
sandwiches they were prepared in advance. This allows for speed in the
system (ingredients ready before customer even arrives) and also some
economies of scale (large batches of bread produced at the same time),
in addition to opportunities for quantity discounts.
The pull elements all occur when the customer places the order The
customer can have a sandwich built to their exact specifications quickly
and while still allowing for a reasonable level of quality consistency for
all orders.
Companies are free to decide how much push or pull to introduce into
their system. Some companies may only choose to allow product color
as a postponed option (a very push-oriented system). Other companies
may allow for 5, 10, or more customizable options (a very pull oriented
system).

4- Bullwhip Effect
The bullwhip effect is a supply chain phenomenon where fairly stable
demand results in a proliferation in the amount of inventory that is
carried as one travels upstream in the supply chain. Distribution carries
more inventory than retail. Manufacturing carries more inventory than
distribution. Suppliers carry more inventory than manufacturers. And so
on, and so on.
Explained: In business, dealing with uncertainty is a constant challenge.
One of the more common tools supply chain managers utilize to battle
uncertainty is inventory.
 Is there a chance of theft? Damage? Loss?
Is there a chance my sales forecast might be wrong?

In all of these cases and in many others an easy way to try and minimize
the impact of these uncertainties is to carry extra inventory. A retail store
has uncertainty about consumer demand. Thats one level of uncertainty
so they need some safety stock. Distribution, though, has to deal with
both the uncertainties related to consumer behavior and also the
uncertainties with behaviors at all of their retail stores. Thats two levels
of uncertainty, thus they need more inventory. Manufactures have three
levels of uncertainty in front of them: distribution, retail, and consumer
uncertainties. Thus, they need even more inventory. This constant
amplification of inventory from one supply chain level to the next is the
bullwhip effect.
5- Causes of the Bullwhip Effect
If the bullwhip effect is caused by uncertainty then very likely. most
causes of the bullwhip effect are related to poor observations, poor
supply chain practices, and poor communication. The following are just
a few key causes of the bullwhip effect:
Order Batching When companies place large and infrequent orders
from their suppliers. Typically this is done to take advantage of quantity
discounts and economies of scale in purchasing and delivery. The
problem is that the infrequent orders leave large communication gaps
(uncertainty) for suppliers and it may also require suppliers to carry
large amounts of inventory so they can be prepared when those large
orders are actually placed.
 Forward Buying This is the result of suppliers offering sales. Buyers
are motivated to buy in large quantities to take advantage of low prices.
Buyers are not buying based on demand, but rather on price. Therefore,
true demand is unknown by sellers (uncertainty). Sellers experience the
uncertainty of demand due to their own short-term drops in price for
their customers.
Rationing Sometimes, despite their best efforts, suppliers do not have
enough inventory to satisfy the demand of all of their customers. If this
is the case, suppliers may ration their inventory and send each of their
customers only a fraction of the inventory that was ordered. For
example, if a company receives orders for 1,000 total units from their
customers, but only has 800 units of inventory available, that company
might only send each of their customers 80% of their orders. These
smaller than expected deliveries introduce doubt into the system and
thus may trigger negative behaviors in the future.
Shortage Gaming Rationing can often lead to shortage gaming. In
rationing, customers only receive a fraction of their placed order. This
leaves the customer short of their desired inventory level. If customers
feel that this rationing may occur again, customers may try to game
the system by placing an order larger than their expected demand. For
example, if their demand is 80 units, they may place an order 100 units
instead of the 80 units needed. The rationale is that when the supplier
sends them only 80% of their placed order, they will get exactly the
demand needed.
This is can cause so many types of problems. This would include the
possibility that the supplier has enough inventory to fulfill the 100 unit
order. In this case the customer now has more inventory than needed. On
the other hand, if the supplier does need to ration deliveries, they will
still feel as though the customer wanted more. This may cause suppliers
to inflate inventory levels in subsequent periods in an effort to meet the
large, but false, demand of their customers.

6- Lean Manufacturing
A production philosophy that strives to meet consumer demand and
desires but with minimal inventory levels and minimal supply chain
waste.
(In the past some people referred to Lean Manufacturing as Just-in-time
(JIT) and/or the Toyota Production system (TPS). Some will argue they
are different, some will say there is no significant difference. For this
module we will assume there is no difference between lean
manufacturing, JIT, and TPS.)
Explained: First, it is important to remember that consumer desires are
constantly evolving. Even if a company meets consumer demand and
desires today, this does not guarantee that they will continue to satisfy
consumers into the future.
This brings us to the second important point, since consumers demand
and desires are moving targets; there is no single set of business
practices that will guarantee success. Lean Manufacturing is a
philosophy or set of values that can guide a company toward good
decision making in their supply chains. Nonetheless, as companies strive
to provide consumers value they seek to do so by maximizing
productivity. Therefore, all supply chain decisions driven to provide
consumers with value need to also be weighed against the types of waste
that might be produced for the company: Waiting time, transportation,
stored inventory, defects, motion, unnecessary work, inventory
produced
7- Keys to Lean Manufacturing
By no means is the following a complete list of the issues a company
should consider when trying to be lean, but these are some of the most
common elements of developing a lean philosophy.

High Performance Quality Being lean means being devoted to the

consumer. Companies with lean systems have the ability to be fast and
flexible, thus they can innovate and bring their customers the very best
products and services.
Consistent Quality In addition to providing the best quality,
customers expect consistency from one purchase to the next. Lean
companies look for simple but reliable practices. Simplicity and
reliability are keys to consistent quality.
Quality at the source Empowering every employee to be a quality
inspector and manager. By having knowledgeable employees that can
identify errors and are then empowered the to act, lean companies can
find and fix errors as early as possible in the supply chain. The earlier
errors are identified the lower the associated costs. In the old days,
companies would have inspectors at the end of the process. The
inspectors would find errors long after the errors were first made, thus
additional work would be done on items that might already be worthless
Continuous Improvement - Being lean means being devoted to the
consumer. Companies that do not focus on continuous improvement of
the product, the processes, the buyer-supplier relationships, and
materials used are overlooking opportunities to keep old customers, find
new customers, improve quality, increase speed, offer more flexibility,
and control costs.
Poka-yoke Mistake-proofing. Lean companies will find ways to
completely eliminate certain types of errors. For example, suppose two
digital devices are to be connected. Connecting them requires 5 wires be
plugged from one device to the other. Suppose that the 5 wires each has
a different connector that will only fit into a single connection point on
the second device. This is a poka-yoke since it would be impossible to
fit each of the 5 wires into the wrong connection point since they would
not fit.
Close supplier ties Good relationships, trust, and information sharing
reduce uncertainty and thus will result in fewer unwanted supply chain
surprises. This may lead to fewer stockouts, smaller safety stocks, fewer
expensive rush shipments, and thus less consumer strife.
Small lot sizes Does your company need to produce thousands of
units to achieve a profit and/or economies of scale? When companies
can produce small batches in a profitable manner they can control
inventory levels and still meet consumer demand quickly.
Standardized components and work methods Lean systems are
constantly asked to improve while still maintaining excellent quality.
They can also be rather complex, though. When companies work to
create some standardization it allows the workers to feel more
comfortable in performing their jobs and also in identifying mistakes as
well as defective components. Lean organizations try and meet varying
consumer demand, but when possible, being able to identify
opportunities for standard components and work methods can reduce
stress and aid in the identification and elimination of errors
 Dedication to the Workforce Lean systems require finding errors,
fixing errors, identifying opportunities for improvement, and
relationship management with supply chain partners. Supply chains that
do not invest in their workforce and do not value employee contributions
have little hope of performing well today and improving in the future.
Educating employees, keeping employees informed, and empowering
employees to improve the supply chain are all vital to supply chain
maintenance and growth.
Using Automation when Appropriate Employees are excellent
problem solvers but they grow weary, they can lose focus, and when a
job is too repetitive they can get bored. Utilizing automation can be
helpful in certain situations. If processes are extremely repetitive, require
consistent quality, and must be performed quickly, automation can be an
excellent tool. On the other hand, when too much automation is used
flexibility and quality improvements can be more difficult to achieve.
Short Set-up/Change-over Set-up time is the amount of time it takes
to change a system from producing one product to producing a different
item. Keeping short set-up times allows systems to run leaner
 Module 7
1- offshoring
A strategy where a company moves manufacturing out of its home
country to another country.
Example: Ford Motors has a significant offshoring strategy. While the
American company, Ford Motors, has manufacturing plants in the
United States, Ford also owns and operates manufacturing plants around
the world in many countries including China, Germany, Brazil, Russia,
and South Africa. Those Ford factories that are outside of the United
States are part of Fords offshoring strategy.
2- Outsourcing
when a company contracts an outside firm to perform services,
operations, or business processes that could be or were previously
performed in-house.
Explained: American electronics companies as well as medical device
companies will often use other companies for design, manufacturing,
and/or logistics services. Examples of companies that provide supply
chain services in the United States include Sanima, Benchmark
Electronics, Plexus, and Jabil Circuit.
Note: If Dell Computers (US company) utilized Jabil Circuit (US
company) for supply chain services this would still be seen as Dell
outsourcing, even though both companies are in the United States. Any
time a company hires another company to perform services or operations
it is an outsourcing arrangement, no matter the location of the two
countries.
 3- Offshoring and Outsourcing
A strategy where a company utilizes a contractor in another country to
perform services and/or operations.
Explained: This, obviously, is a strategy where a company both
outsources and offshores. Apple, an American company, utilizes the
manufacturing services of Foxconn a Taiwan-headquartered electronics
manufacturing firm with facilities in Taiwan. Apple, therefore, is
utilizing a strategy that incorporates both offshoring and outsourcing
manufacturing outside of the US, manufacturing done by an outside
party.

4- Contract Manufacturers
A company that produces goods on behalf of another organization.
Explained: Apple designs numerous digital devices but they outsource
manufacturing to companies like Foxconn and Pegatron. Foxconn and
Pegatron would therefore be considered Apples contract manufacturers.
5- Near-sourcing
While this term does not have a consistent definition in the world of
supply chain management, it often refers to a type of offshoring or
offshoring and outsourcing where the location of the manufacturing
facility is relatively close to the location of the consumer.
Typically, it refers to a shift in strategy, where a company used to
manufacture goods very far away (example: 8,000 miles away) from the
home market, but then shifts to manufacturing in a country that is much
closer (example: 750 miles away) to the home market.
Explained: The key words in the definition provided are relatively
close.
Consider Company X, an American company, that sells their products in
the US, but manufactures its products in China because of the relatively
low Chinese labor costs. Now suppose that ocean port strikes become
routine in the United States, and/or perhaps oil prices are volatile very
high one month, very low the next. What might Company X do?
Company X may not want to manufacture in the United States, but they
may consider manufacturing in Mexico. Labor costs will likely be
significantly higher, but the lower risk of late shipments and high
transportation costs may make near-sourcing in Mexico a more viable
option.
Note: Near-sourcing can be used to describe both near-source offshoring
and also near-source offshoring and outsourcing strategies.

6- Customs-Trade Partnership Against Terrorism (C-TPAT)

A voluntary program developed by US Customs and Border Protection
for companies importing goods into the US. The program requires
member organizations to report a significant level of detail related to
supply chain partners and actions for each imported shipment. In
exchange for providing this information to US Customs, member
companies are allowed opportunities for speedier and more hassle-free
customs clearance.
Explained: After the 9/11 attacks, US Customs and Border Protection
wanted to gather more information about shipments entering the United
States. This not only included data relating to the contents of a shipment,
but also data relating to all supply chain partners associated with the
shipment, from the supplier to the shipper that brought the goods into the
United States.
The program is voluntary; importing companies do not need to become
C-TPAT members. Nonetheless, companies that do not join, or are not
accepted, may experience significantly longer wait times at the border
plus they may experience a higher percentage of physical inspections of
their imported goods.

7- Free Trade Zone (FTZ)

A geographic area sanctioned by the government where items are not
under the control of customs authorities. As such, goods can be imported
into a country, brought into an FTZ and then stored, displayed, and/or
manipulated before being re-exported without ever being inspected or
taxed by customs officials. (In some countries these types of areas go
under different names free economic zone, free zone, export
processing zone, special economic zone)
Explained: Free trade zones (FTZs) offer companies the ability to easily
import materials and export finished goods with minimal hassle.
Imagine that a company constantly imports raw materials and parts, only
to create a product destined to be sold outside of the country. This
company is importing materials, paying import tariffs and then re-
exporting those materials. Upon export of the finished good the
company may be able to request a refund of most of the tariffs paid
this is called a duty drawback. While this seems reasonable it is a
constant and cumbersome cycle where corporate monies are out of
pocket.
FTZs therefore create incentives for companies to keep their facilities in
the country rather than moving to another country.

8- Freight forwarder
A contractor (company or person) that helps companies organize the
efficient and effective shipment of goods from one point in the supply
chain to another. Freight forwarders do not actually transport the goods,
instead they negotiate and arrange for one or more logistics companies
to prepare, secure, store, track, and move the cargo.
Explained: If you didnt know how to move your cargo youd likely
want to contact a freight forwarder. Effectively, they act as your logistics
manager, finding logistics partners that can aid in all logistical aspects.
For this logistics management service they would charge you a fee on
top of the fees required to pay the logistics contractors they hire on your
behalf.
While they can be beneficial for any type of domestic shipment, they can
be particularly useful in helping your company export your products.
9- Customs house broker
A contractor (company or person) that helps a clients goods clear
customs in a foreign country.
Explained: When goods are shipped abroad, they must be inspected by a
customs official before they are cleared to enter the country. A customs
house broker acts as your agent in this process. They take over the
responsibilities of importing that occur before the goods reach the
border: presentation of documents, issuing inspection.
 10- Third-Party Logistics company (3PL)
A contractor that performs one or more logistics functions for their client
in an effort to facilitate effective and efficient movement in the supply
chain. This third-party contractor can neither be the buyer nor the seller
of the items being moved.
Explained: Basically, this is can be any company that helps supply chain
partners with any logistical needs. Actually, in some cases, 3PLs may
actually offer services that may fall outside of the realm of logistics
(procurement, assembly, etc.). Below is a short list of the types of
services that might be performed by a 3PL:
Arranging shipping itineraries, in some cases taking over all the
clients logistics responsibilities
Aiding in the import and/or export process
Warehousing, Distribution, Picking and Packing
Containerization and Transportation
Packaging
Documentation
Product tracking, Logistics data and information management
Logistics specific financial services
Management of digital marketplaces for logistics services
As can be seen, there are few boundaries in the 3PL industry; almost any
logistics related company could conceivably call themselves a 3PL
 Module 8
1- Social Responsibility in Business
In the world of business social responsibility often means that an
organization values three things:
Legal and Ethical Behavior Acting within the law in all of the nations
in which they conduct business. It might also include treating
stakeholders well - employees, business partners, and customers.
Sustainability Earth-friendly business practices. Having business
practices, products, and services that do not harm the environment in the
present nor in the future.
Commitment to the Community Investing in the well-being of the
communities in which the business operates as well as the greater world.
Explained: The concept may seem simple, but in fact it can very easily
become manipulated or confused. All three categories are so broad and
general that different parties can interpret them in different ways
Companies may use the term to seek a competitive advantage. Special
interests groups may create radical interpretations of the concept in order
to attack companies

2- How supply chains can be more sustainable

As has been discussed, sustainability solutions are still in development.
Some ideas are good; others have been proven to have adverse effects.
Plenty of ideas are being generated everyday. Here is a shortlist of some
very general ways companies are trying to become more sustainable:
Procurement Purchasing better materials, fewer materials, safer
materials
Logistics Transportation efficiencies, reduce fuel consumption
Manufacturing and Operations, Facilities Energy consumption,
defect reduction, minimize emissions
Reverse logistics Recovery of packaging, damaged items, parts, etc.
for reuse, refurbishing, re-sale, recycling
Supply chain sustainability catalysts Large powerful companies can
become catalysts often have the power to motivate thousands of
suppliers to become sustainable. This not only impacts the catalysts
supply chain, it impacts every other company that buys material from
that supplier.
Rethink design Poor design will always yield poor outcomes.
Sometimes companies need to start from scratch and develop a new
design. Example: Electric car engines instead of gasoline powered
engines
Sustainability Accounting Companies cannot fix a problem until they
can find the source. With the help of accounting supply chains can
identify primary areas of costs related to unsustainable business
practices.
Develop Sustainability Metrics Metrics help companies find
problems, track improvement, and they can also motivate employees to
change their behavior.
Life Cycle Analysis A systematic approach that attempts to quantify
the environmental impact of every step in the supply chain. This helps
companies identify different types of problems in different parts of the
supply chain. The hope is that this will guide managers to create
individualized sustainability goals for different departments or functions.
Explained: While all of these seem rather simple and direct, the required
creativity in planning and commitment to change is typically what sets
apart companies that desire sustainability versus those that actually
achieve sustainability.