1.4 Supply Chain: Drivers and Metrics

Question 1

Drivers of Supply Chain Performance

Answer 1

Logistical Drivers:
- Facilities
- Inventory
- Transportation
Cross-Functional Drivers:
- Information
- Sourcing
- Pricing

Question 2

Facilities - Fundamental Conflict:

Answer 2

▪ Number of facilities:
Centralized vs. decentralized
▪ Capacities of facilities:
High utilization vs. excess capacities
▪ Flexibility:
Adaptability of output quantity/product

Question 3

Facilities - Examples for Indicators / Metrics

Answer 3

▪ Capacity
▪ Utilization
▪ Processing / setup / down / idle time
▪ Theoretical flow / cycle time of production
▪ Product variety

Question 4

Inventory - Fundamental Conflict

Answer 4

▪ Cycle inventory:
Carrying costs vs. replenishment costs
▪ Safety inventory:
Capital commitment vs. service level/lost sales
▪ Seasonal inventory:
Carrying seasonal inventory vs. cost of flexible production rate

Question 5

Inventory - Examples for Indicators / Metrics

Answer 5

▪ Average inventory
▪ Average cycle inventory
▪ Average replenishment batch size
▪ Average safety inventory
▪ Alpha/beta level of service (service level, fill rate)

Question 6

Transportation - Fundamental Conflict

Answer 6

▪ Lead times:
Short lead time vs. high utilization of transportation
▪ Choice of transportation mode (means of transport):
Fixed costs and variable costs

Question 7

Transportation - Examples for Indicators / Metrics

Answer 7

▪ Average inbound transportation cost
▪ Average income shipment size
▪ Average outbound transportation cost
▪ Average outbound shipment size
▪ Fraction transported by mode

Question 8

Information - Fundamental Conflict:

Answer 8

▪ Information infrastructure:
Complexity vs. benefits

Question 9

Information - Enabling technologies

Answer 9

▪ Electronic Data Interchange (EDI), Internet
▪ Enterprise Resource Planning (ERP)
▪ Supply Chain Management Software
▪ Radio Frequency Identification (RFID)

Question 10

Information - Examples for Indicators / Metrics

Answer 10

▪ Forecast horizon
▪ Frequency of update
▪ Forecast error
▪ Seasonal factors
▪ Variance from plan
→ The coordination of a SC requires appropriate information (e.g. about inventory, transportation or customers)

Question 11

Sourcing - Fundamental Conflicts

Answer 11

▪ Manufacturing:
In-house vs. outsourcing
▪ Number of suppliers:
Single sourcing vs. multiple sourcing
▪ Supplier selection:
Direct negotiation vs. auction

Question 12

Sourcing - Examples for Indicators / Metrics

Answer 12

▪ Average purchase price
▪ Range of purchase price
▪ Average purchase quantity
▪ Supply quality
▪ Supply lead time
▪ Supplier reliability

Question 13

Pricing - Fundamental Conflict

Answer 13

▪ Pricing strategies:
Fixed prices vs. variable prices
(e.g. discount campaigns, quantity discounts or tariff systems)
▪ Demand profiles:
Every day low pricing vs. High-low pricing

Question 14

Pricing - Examples of Indicators / Metrics

Answer 14

▪ Profit margin
▪ Incremental fixed cost per order
▪ Incremental variable cost per unit
▪ Average order size
▪ Range of periodic sales