Module9

Question 1

Supply Chain Coordination Definition

Answer 1

Definition: Coordination means that supply chain stages work together to improve performance by aligning plans and objectives and taking joint actions.

Question 2

Importance of Coordination

Answer 2

• Lack of coordination reduces total supply chain profits
• Leads to high variability (e.g., the bullwhip effect) across the supply chain
• Goal: Align decisions and actions across all stages

Question 3

The Bullwhip Effect (BWE)

Answer 3

Definition: The phenomenon where order variability increases as we move upstream in a supply chain, despite stable demand downstream.

Question 4

Causes of the Bullwhip Effect

Answer 4

• Order batching (periodic orders, large lots)
• Performance incentives (bonuses, quotas)
• Demand forecasting based on orders, not end-user demand
• Product rationing and shortage gaming
• Promotional pricing causing distorted demand

Question 5

Negative Effects of Bullwhip

Answer 5

• Increased manufacturing, inventory, lead time, and transportation costs
• Higher labor costs for shipping and receiving
• Lower product availability
• Worsened relationships across the supply chain

Question 6

Measuring Information Distortion

What are the two dimensions?

Answer 6

Two dimensions to measure:

1. Order variance amplification (levelness)
2. Schedule instability amplification (stability)

Question 7

Definition: Levelness

Answer 7

• Refers to how much order quantities fluctuate over time
• In a perfectly level schedule, required materials per period remain constant

Question 8

Definition: Stability

Answer 8

• Refers to how consistent forecasts remain for a given future time period
• In a perfectly stable schedule, all forecasts for a particular week match the actual requirement

Question 9

Order Variance Ratio (OVR)

prüfungsrelevant?

Answer 9

Formula: OVR_I = S²(I_{k_outgoing}) / S²(I_{k_incoming})
- BWE is said to prevail if OVR_I > OVR_H (upstream > downstream)

BWE: Bull Whip Effect

müssen wir solche sachen rechnen können?

Question 10

Measuring Schedule Instability

Answer 10

Schedule_change = (Maximum - Minimum) / Mean of forecasts for a particular period
Instability = average of schedule_change values over k periods

Question 11

5 Obstacles to Coordination

Answer 11

1. Incentive obstacles
2. Information processing obstacles
3. Operational obstacles
4. Pricing obstacles
5. Behavioral obstacles

Question 12

Obstacle 1: Incentive Obstacles

Answer 12

• Misaligned incentives among supply chain participants
• Leads to local optimization (e.g. placing periodic orders based on EOQ)

Question 13

Remedies for Incentive Obstacles

Answer 13

• Align goals across stages (shared objectives)
• Use coordinating contracts (e.g., buy-back, revenue sharing)
• Implement Sales and Operations Planning (S&OP)

Question 14

Obstacle 1 Example: Sales Force Incentives

Answer 14

• Monthly/quarterly sales targets can cause end-of-period spikes
• Remedy: Incentives over rolling horizons or sell-through (not sell-in)

Question 15

Obstacle 2: Information Processing

Answer 15

• Forecasting based on orders, not end-user demand
• Lack of information sharing (promotions, demand signals)

Question 16

Remedies for Information Obstacles

Answer 16

• Share POS (Point Of Sales) data and use collaborative planning
• Single-stage control of replenishment (e.g., VMI, CRP)

Question 17

Obstacle 3: Operational Obstacles

Answer 17

• Large lot sizes create order batching
• Long replenishment lead times lock in incorrect demand patterns
• Shortage gaming (inflated orders)

Question 18

Remedies for Operational Obstacles

Answer 18

• Smaller lot sizes via e-procurement, shared shipments, or simpler receiving
• Reduce lead times (digitalization, flexible manufacturing)
• Rationing schemes discouraging inflated orders (turn-and-earn)

Question 19

Obstacle 4: Pricing Obstacles

Answer 19

• Lot-size based quantity discounts encourage big orders
• Price fluctuations (trade promotions) drive forward buying

Question 20

Remedies for Pricing Obstacles

Answer 20

• Use volume-based (time-period) instead of lot-size discounts
• Stabilize pricing: EDLP, limit promotional quantities, match actual demand

Question 21

Obstacle 5: Behavioral Obstacles

Answer 21

• Stages view actions locally, blame each other
• Little learning over time
• Lack of trust and cooperation

Question 22

Remedies for Behavioral Obstacles

Answer 22

• Build trust through accurate, shared information
• Strengthen cooperation (strategic partnerships > arm’s-length)

Question 23

Supply Chain Relationships Spectrum

Answer 23

• Discrete/transactional (multiple suppliers, market-based)
• Relational/partnership (long-term, cooperative)
• Various levels from Type I (basic coordination) to Type III (full integration)

Question 24

Definition: Supply Chain Partnership

Answer 24

A tailored business relationship based on mutual trust, openness, shared risks and rewards, yielding performance greater than if working independently.

Question 25

Partnership Levels (Lambert et al.)

Answer 25

• Type I: Limited coordination, short-term
• Type II: Integration of activities, longer-term
• Type III: Significant integration, no defined end date

Question 26

Key Ingredients of Partnerships (1)

Answer 26

• Shared vision and objectives
• Trust
• Personal relationships
• Mutual benefits: Win-win approach

Question 27

Key Ingredients of Partnerships (2)

Answer 27

• Information sharing and communication lines
• Top management support
• Change management
• Relationship capabilities (quality, cost, delivery)