Chapter 16 - Risk and Sustainability

Question 1

Supply Chain Dynamics are Changing
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Answer 1

• Firms looking for more balance between scale and reliability.
• Infrastructure congestion is becoming increasingly problematic.
• Increased energy cost will shift supply chain mode selection and design.
• Increasing importance of being able to quantify the value proposition related to supply chain changes.

Question 2

**Changing Dynamics of Supply Chain Design

Answer 2

(figure) (1.cost of transport 2. Result of increased fuel cost 3. Result of increased risk)

Question 3

**(from 2)
How additional SC cost factors affect centralization

Why?

Answer 3

increase SC cost factors –> increase decentralization

Less # of units, less economies of scale bc they bought from sources vs making it internally.

Question 4

**Variation typically results in higher supply chain costs, but more choice for customers

Benefits of Low Complexity

Characteristics of High Complexity

Answer 4

Benefits of Low Complexity

• Better product development
• Improved product quality and reliability
• Improved demand/ forecasting/ customer service
• Lower sales support costs/ resources
• Increased flexibility and reduced lead time

Characteristics of High Complexity

• Increased revenue
• Higher product cost
• Lowered ability to change/innovate
• Other costs/risks
• Lost sales
• Lowered service and support opportunities

Question 5

**Product complexity is the number of product
design variations a firm offers and supports

INCREASED COMPLEXITY

Answer 5

• Increased complexity results in higher supply chain cost
  
  • More inventory, fewer economies of scale and more management attention
• Increase complexity often results in increased revenue
• May improve profitability and asset utilization

Question 6

**Product complexity is the number of product
design variations a firm offers and supports

LESS COMPLEXITY

Answer 6

• Less complexity (i.e. more commonality) reduces supply chain costs
  
  • E.g. Toyota has only two variants for auto door latches while competitors have over 10
• Reduced product variations may lower sales
• Firm’s offerings are less attractive with fewer features or characteristics

Question 7

**Outsourcing as a risk management technique

Answer 7

• Use of third-party logistics (3PL) firms or logistics integrators to provide services on a contractual basis
  
  • 3PL providers offer integrated transportation and warehousing services
• Shift risk of a supply chain activity to an outsourcing partner with expertise
• Pooling capacity across clients results in a lower risk of not being able to meet customer demands in a surge

Question 8

Supply chains need to be secure and resilient

Answer 8

• Resiliency is the ability of the supply chain to withstand and recover form an incident
• Resilient supply chains
  
  • Are proactive in anticipating and establishing steps to prevent and respond to security incidents
  • Can quickly rebuild or reestablish alternative means of operations when they experience a security incident

Question 9

**Drivers for green supply chain management
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Answer 9

• Rising energy costs
• Global concerns about green house gases
• Climate change
• Regulations
• Technology innovations
• Increased public awareness of environmental issues