Lecture 10 - Planning & Control Across the Supply Chain Flashcards
Define the Bullwhip Effect
Small fluctuations in demand downstream gets magnified as it travels upstream towards suppliers
- demand signal is distorted and amplified variably as it is transmitted upstream
In general,
material flows …
and
information flows…
material flows downstream
and
information flows upstream
Impact of Bullwhip Effect
*excessive inventories
- may have stock-outs when bullwhip effect leads to a sudden drop in inventory
- inefficient logistics and scheduling issues
- human resources issues (comms issues, more stress on employees with changing in production needs)
*excessive admin and fire fighting (time and effort to deal with problems)
Why does demand signal distortion happen
- limited visibility to information
- players in the supply chain operating independently and just responding to order information from downstream
- order policies
- less frequent orders distort demand signal
- adding safety stock to the forecast distorts demand signal
- gaming behaviour
- inflation of orders to receive EoS or discounts distorts demand
How to Mitigate the Bullwhip Effect
- greater integration across supply chain
–> communication and collaboration in:
- planning
- forecasting
- replenishment
(ERP could help)
*vendor managed inventory
–> supplier controls retailers inventory
*continuous replenishment program
–> more frequent, small orders based on sales data
- more accurate forecasting that considers historical data, trends and competitor activity
What is the traditional approach to supply chain collaboration
- contract based
- arms length relationship, do their job but no collaboration
Ways collaboration can occur in a supply chain
and what are the three frameworks
- information
- Continuous Inventory Replenishment
- inventory management
- Vendor Managed Inventory (VMI)
- planning/ forecasting
- Collaborative Planning
What is continuous inventory replenishment
features?
- share information on stock, automatically triggers replenishment when inventory dips below re-order point
–> demand and supply is matched as closely as possible - automated
- frequent, smaller orders
What is VMI
- Vendor Managed Inventory
supplier is provided with real-time demand and inventory information and takes responsibility for decision making on how much to replenish and when
What is CPFR
*Collaborative Planning, Forecasting and Replenishment
- web-based supply chain framework that helps SC partners to collaboratively plan, forecast and replenish inventory
- used alongside ERP
- transparent and open in communication
Give examples of process-focused performance metrics
- productivity
= output / input - efficiency
= actual output / effective capacity (or design capacity) - utilisation
= productive time / time available - yield
= % good products / total produced - plan/schedule stability
- measure of deviation from plan
Give examples of customer-focused performance metrics
- timeliness
–> actual date delivered - due data
(average, maximum or proportion of lateness) - response
–> lead time
(average or maximum)
*reliability
OTIF = % delivered on time and in full
What does the SCOR model stand for
what does it measure
- Supply Chain Operations Reference model
framework for developing, monitoring and improving supply chain performance, developed by the Supply Chain Council (US)
What does the SCOR allow companies to do
Measure performance objectively
Communicate with the council on supply chain issues
- uses ERP performance dashboard too
What are the five core management processes identified in SCOR
*Plan
*Source
- Make
- Deliver
- Returns
