Intro Flashcards
Two objectives of SCM
Cost optimisation
Service level optimisation
Components in definition of SCM
- Network
- Information flow
- Coordination
- Avoid conflicting objectives
- Balance cost and service
- Long-term relationship
Development chain
Plan/Design, Source, Produce
Supply chain
Supply, Produce, Distribute, Sell
Network coordination
Coordination = integration
Information sharing and cooperation
Fisher’s strategies
Responsive or Efficient supply chain, decided before global optimisation
Fisher nature of demand
Functional - everyday products, stable predictable demand, long life cycle, low profit margins
Innovative - unpredictable demand, high profit margins, short life cycle
Two distinct functions of a SC (Fisher)
Physical function - focus efficient
Market mediation - focus responsive
Local optimisation
Only costs and gains of each individual party considered
Global optimisation
Close cooperation takes place between different parties in SC
Characteristics:
- Strategic
- Tactical
- Operational
- Long-term: Often longer than a year. ex. where to build production facility
- Tactical: Shorter term less than a year. ex. choosing supplier of packaging
- Operational: Day-to-day decision making. ex. planning route of truck
Challenges in implementing global optimisation
Complex network - players in SC have often conflicting goals
Dynamic system - changes over time
Push strategy
Based on long-term predictions. “Pushing” products to the market can lead to shortages or obsolescence.
Takes long to reach to market changes
Goal: minimise costs
Pull strategy
Production driven by specific customer orders and makes no use of predictions. Fast information flow mechanisms.
Key to share demand data to supplier
Goal: maximise service level
“Forwards” in SC
Car manufacturers –> Garage owners
“Backwards” in SC
Car manufacturers –> Suppliers
When to use push strategy
Stable demand. Large benefits from economies of scale. Long production lead times
When to use pull strategy
Uncertain demand. Low impact of economies of scale. Short lead time
Push-pull strategy
Long lead time
Demand uncertainty high
e.g. General Motors
Continuous replenishment
Low demand uncertainty, short lead time
One Fanta bought, one Fanta added to order list
Inventory positioning
High demand uncertainty, long lead time
Place warehouses and distribution centres strategically
Bullwhip effect
Every player in the SC makes use of safety margins based on demand predictions by previous player in the chain.
More prominent in push strategy
Physical function (Fisher)
Transforming taw materials into parts, components and finished goods and transporting them.
Market mediation function (Fisher)
Function of ensuring that the variety of products that reach the market satisfy what the customers want.
Accurate response (Fisher)
Accurate forecasting certain aspects of demand and setting up flexible production processes for the uncertain aspects of demand.
Points successful BTO systems incorporate (Holweg & Pill)
Process flexibility Perpetual sales data through SC Product flexibility Volume flexibility e.g. Nike ID
Making transition to BTO system
- Offer BTO services for existing products
- Introduce BTO services for new products
- Combine BTO with forecasting
