6 SCM Exercise Debrief Flashcards
What happens to inventory and order fluctuations as they go up the supply chain?
The fluctuations are amplified with a time lag
Slide 3
What caused people to act the way they did?
- Lack of communication
- Led to guessing customer demand
- Led to arbitrary order decisions
- Resulting in the “bullwhip” effect - Long lead times
-Leads to panic decision-making, when inventory does not instantly arrive and solve your growing backlog, you panic and order even more
Define the bullwhip effect and what can make it stronger.
information (orders) going back through the supply chain
is distorted and amplified
Can be made strong by a longer lead time
What are the business implications of the supply chain structure? (5)
- Stockouts at times
- Lost profit and potential lost goodwill - Excess inventory at times
- holding costs, risk of obsolescence, etc. - Overtime costs
- 50% - 100% increase in labour costs - Layoffs / Re-hiring costs
- Match staffing levels to fluctuating demand - Expediting
- rush transportation costs
What is an example of the bullwhip effect?
Tyson Foods with their chicken business.
Their demand surged after COVID-19 when people were coming back to restaurants and they ramped up production too much which forced them to layoff 4700 employees and shut down 4 plants in 2023
Bullwhip measure
Slide 12
Who is an example of a supply chain success during the pandemic?
Stanley tools
Retailers were running down stock during the start of the pandemic but the CEO of Stanley believed that their sales were increasing and stores would have to place large orders for them. He decided to make $600M in tools. This paid off big for them with a 57% increase in profit and a 25% increase in sales, partially fueled by price boosts.
How can we improve the supply chain?
- Communication and cooperation
- Shorten Lead time
How can you improve communication and cooperation? (3)
- Figure out actual customer demand
-Through information technology - Encourage communication and cooperation
- Incentive to share info (per unit discount)
- Vendor-managed inventory (VMI) - Forecasting
- Collaborative planning forecasting and replenishment (CPFR)
Who was the first to try to get daily demand data and when was it?
Mattel, more specifically Ruth Handler the creator of Barbie, sent a bunch of employees to check the stocks of the toys daily
How does Canadian Tire use CPFR?
Slide 16
Under the new system, Canadian Tire now provides suppliers with a 26-week planned order stream for each stock-keeping unit (SKU), which is regenerated weekly, enabling suppliers to see far in advance when demand for an item will “pop”.
How can you shorten the lead time? (3)
- Administration (Ordering) Lead Time:
- Information Technology - Physical manufacturing Lead Time:
- Just-in-time production systems (low setup time)
- Very small batches = faster production completion - Transportation Lead Time:
- Have supplier geographically close by
What are two examples of on-shoring and why did each company do it?
- Ikea opening manufacturing in the USA because “The most expensive part of the home furnishings business is actually transporting”
- Ford opened a “supplier campus” less than 1 mile away from the assembly plant where they made things like wire harnesses. This greatly reduced the lead time and created just-it-time sequencing for Ford
Benefits of next-shoring
Slide 19
What has been the trend with supplier locations over recent years?
A huge increase in reshoring
Slide 20
