MECHENG352 - Supply Chain

Question 1

Challenges of Supply Chain Management

Answer 1

1. Globalization - can involve dozens of countries and hundreds of parts vendors and facilities.
2. Compliance - with various regional, national, and international compliance requirements. Including safety laws, environmental laws, inclusivity, and accessibility rules and guidelines, standards and quality specifications.
3. Hiring the right suppliers - getting the right partners. Sort of an art. Judge people and predict their ability to deliver in time and quality. Need to train suppliers fir delivery with right specifications, follows necessary standards, passes quality controls that your business demands.
4. Inventory - companies often unsure of what stock they own and confusion on whether products have been lost due to their SCM system not being as reliable as expected. Too much stock to keep track of = not being sold.
5. Market growth - hard to increase customer base home and abroad. Need to consider policies, fees, and government policies.

Question 2

Material and information flow

Answer 2

Supplier - Producer - Distributor - Retailer - Customer

Product flows right, information flows left

Question 3

Bullwhip effect

Answer 3

The Wall Street Journal describes the bullwhip effect as: “This phenomenon occurs when companies significantly cut or add inventories. Economists call it a bullwhip because even small increases in demand can cause a big snap in the need for parts and materials further down the supply chain.”

Question 4

Consequences of the bullwhip effect

Answer 4

Inefficiencies

• high (safety) stock levels
• poor customer service levels, unfulfilled orders, lost revenue
• poor capacity utilization
• misguided demand forecasts
• ultimately high cost and low levels of inter-firm trust

Question 5

Causes of the bullwhip effect

Answer 5

• Order batching
  Order batching occurs when each companies takes order quantities it receives from its downstream customer and rounds up or down to suit production constraints such as equipment setup times or truckload quantities.
• Price fluctuations
  Very often, special discounts and other cost changes can disturb regular buying patterns. What buyers want is to take advantage on discounts offered during a short time period, resulting into irregular production and distorted demand information.
• Demand information
  It is essential to understand that relying on past demand information to estimate current demand information of a product does not take into account any fluctuations that may occur in demand over a period of time.
• Lack of communication
  Due to lack of communication between each link in the supply chain, it gets difficult for processes to run
  efficiently.
• Free return policies
  Sometimes, customers may purposely overstate demands due to shortages and then cancel when the supply becomes adequate again, without return forfeit retailers will continue to exaggerate their needs and cancel orders; resulting in excess material.

Question 6

How to minimize the bullwhip effect?

Answer 6

• Improved communication & better forecasts – A good strategy which can be used to minimize the
  bullwhip effect is through better information, in terms of improved communication along the supply chain and better forecasts. Since managers believe that end-user demand is more predictable than the demand experienced by factories, they usually attempt to ignore signals being sent through the supply chain and instead focus on the end-user demand. This method ignores daily fluctuations in favor of running level.
• Streamline your supply chain – Reducing the number of suppliers and the number of tiers in your supply chain can facilitate better communication across teams and decrease the swing that creates the bullwhip effect. Utilizing supply chain automation technology helps link together all aspects of the supply chain and consolidate communication channels.
• Eliminate delays – Another way to reduce the bullwhip effect is by eliminating the delays along the supply chain. Basically, by cutting order-to-delivery time by half in both real supply chains and simulations of supply chains, supply chain fluctuations can be cut significantly.
• Reduce size of orders & good customer service – Another method to prevent the bullwhip effect consists of reducing the sizes of orders and constantly offering good product prices as a way to prevent surges resulting from promotional discounts. Besides, improving customer service and eliminating causes for customer order cancellations to ensure smooth ordering patterns.
• Minimize special sales and discounts
  Maintaining a steady price point even during market fluctuations decreases the bullwhip effect by encouraging a regular stream of customer demand. Clothing and accessories business Everlane reduces the bullwhip effect by rarely holding sales or giving discounts, instead opting to keep prices low year-round with a smart direct-to-consumer model.
• Optimize inventory management
  Keeping track of stock levels, orders, and demand with inventory management software leads to more accurate ordering from suppliers, decreasing the bullwhip effect.
• Transformation into a digital supply chain

Question 7

Benefits of supply chain 4.0

Answer 7

-Faster
-More flexible
-More granular
-More accurate
-More efficient

Question 8

Current drawbacks with how the supply chain currently operates

Answer 8

1) Data capturing and management - often handled manually and not updated regularly
2) Integrated process optimization - many have started to implement an integrated planning process but very often this is still done in silos and not all info is leveraged to achieve the best planning result possible.
3) Physical process execution of humans and machines - warehousing, assembly line replenishment, transport management, etc is often done based on gut feeling but not leveraging available data. Warehouse operations are still managed in batches of one to two hours, not allowing the real-time allocation of new orders and dynamic routing. Opportunities from new devices, i.e. wearables like google blass or exoskeletons are not leveraged.

Question 9

Areas influenced by supply chain 4.0

Answer 9

Planning - dynamic safety stocks, dynamic pricing, minimal inventories
Physical flow - horizontal integration, data connectivity between companies.
Performance management - real-time performance analysis over all levels. Data-mining and machine learning for automated root cause analysis.
Order management - real time replanning considering all constraints
Collaboration - customer, company, suppliers, distributors. Reliable planning data, reduction of lead time
Strategy - microsegmentation, mass customization of supply chain offering, separating supply chain into hundreds of individual supply-chain segments
Impact - reduce lost sales, transport and warehousing costs, SC admin costs, and inventories