Lecture 4 - Supply Chain Management

Question 1

Define supply chain:

Answer 1

A set of intermediaries that bring raw material to the final product and consumption.

Question 2

Define supply chain management:

Answer 2

Governing the execution of these activities ( the steps from raw materials to final product)

Question 3

Why doesn’t one company do the entire process by themselves? (Why does sourcing exist?)

Answer 3

1. They don’t have the required expertise/technology, thus they lose profit when they diversify out of their core business.
2. Resource constraints (don’t have enough resources/not enough for economies of scale)
3. Lower costs when outsourcing different parts (due to different labor costs in different countries, level of expertise etc)

Question 4

What is an echelon?

Answer 4

A step in the supply chain (distributor, retailer, manufacturer etc)

Question 5

Which direction does “downstream” in a supply chain imply?

Answer 5

From the manufacturer and down towards the end-consumer.

Question 6

What is forward vertical integration?

Answer 6

When a company starts controlling another echelon in the direction of the customer. Therefore, you integrate into the business your previous buyer occupied. (Manufacturer–> distributor)

Question 7

What is backward vertical integration?

Answer 7

When a company starts controlling another echelon in the direction of the manufacturer. Therefore, you integrate into the business your previous supplier occupied. (Retailer –> manufacturer)

Question 8

Give two examples of companies who have pursued backward vertical integration:

Answer 8

Amazon

Netflix

Question 9

Give one example of a company that has pursued forward vertical integration:

Answer 9

Zara

Question 10

What are the risks associated with outsourcing?

Answer 10

1. Delivery risk
2. Loss of flexibility
3. Loss of core activity
4. Loss of intellectual property

Question 11

What might cause supply chain disruptions?

Answer 11

1. Strategic geopolitical risk factors, such as Iran choking supply of oil.
2. Unanticipated events, such as natural disasters, the blockade of the suez canal etc.

Question 12

Define resilience

Answer 12

The ability to return to the original state after being stressed.

Question 13

What are the two different kinds of resilience strategies?

Answer 13

Mitigation strategy

Contingency strategy

Question 14

Define a mitigation resilience strategy:

Answer 14

The implementation of actions in anticipation of possible disruption.

Question 15

Define a contingency resilience strategy:

Answer 15

The implementation of actions while at the time of crisis to prevent further damage and to restore operations.

Question 16

Name some operational strategies to manage supply chain disruption:

Answer 16

1. Stockpile Inventory
2. Diversify and backup supply
3. Managing demand
4. Strengthening supply chain (supporting the chain)

Question 17

What is stockpile inventory?

Answer 17

Holding inventory so that it can be used to fulfill customer demand during supply disruption.

Question 18

How does one diversify and back-up supply?

Answer 18

By having multiple vendors/suppliers for one component or an emergency vendor/supplier to source components during disruptions.

Question 19

How does one manage demand?

Answer 19

Adjusting demand fulfillment and selecting which supplies that will be available to customers during the disruption period.

Nissan case: The act of focusing on the US and China while only producing the most popular models.

Question 20

How does one support your supply chain?

Answer 20

By working with suppliers to reduce the severity of the supply chain damage and to decrease bottlenecks.

Thus, allocating capital to speed up the recovery of both your suppliers (manufacturers) and buyers (retailers, distributors, wholesalers per example)

Question 21

Name some resilience strategies:

Answer 21

1. Fast action (setting up a crisis management team)
2. Training Employees (Drills)
3. Part commonality (Decreasing risk with less specifications)
4. Informations updates (To act on data)
5. Cross functional and cross regional employees (to allocate resources efficiently)

Question 22

Why would one want to forfeit demand?

Answer 22

Due to the possibility of being able to charge more at a later state, thus increasing profit margins.

Essential both to operations management and revenue management. (Airplanes).

Question 23

What is the bullwhip effect?

Answer 23

The amplification of a small change within the initial demand stages of a supply changes into an increasing mismatch between supply and demand in the production of a product.