Supply Chain Integration and Challenges Flashcards
SC Integration
SC Integration
Customers & Suppliers collaborate using management techniques to optimize the creation, distribution and support of a final product
Barriers to SC Integration
The Silo Mentality
* ”I win, you lose”
* Using cheapest suppliers
* Ignoring customer
* Assigning few resources to new products and service design
Lack of Trust and Communication
* Successful process integration requires trust and trust is earned over time
* Collaboration and trust are based on;
=> Start small
=> Face-to-face meeting
=> Go for win-to-win
=> Some information should remain proprietary
=> Just do it: Simple start – sharing information
Lack of Knowledge
* Technologies enables the integration process cross extended supply chains
* Successful supply chain management relies on significant time influencing and increasing the capabilities of the firms and their partners
* Training of supply chain partner employees is also known as collaborative education, and can result in more successful supply chain
Bullwhip Effect
Bullwhip Effect
Activities Causing the Bullwhip Effect
* Forecasting and their corresponding orders along the supply chain can become amplified and accumulate, *causing the bullwhip effect
- Variations in demand lead to problem in capacity planning, inventory control, workforce and production scheduling resulting in reduced customer service, increase safety stock, and higher supply chain costs
- Higher variability in orders placed by retailer to manufacturer than actual sales.
Example:
* Promotional sales
* Volume and transportation discounts
* Inflated orders
=> E.g. IBM Aptiva orders increase by 2-3 times when retailers thought that IBM would be out of stock over Christmas
* Demand Forecast
* Long cycles times
Consequences
* Increased safety stock
* Reduced service level
* Inefficient allocation of resources
* Increased transportation costs
Solutions to reduce the Bullwhip Effect
Reducing Bullwhip
Make actual demand data available to suppliers
Vendor-managed inventory (VMI)
Reduce the length of supply chain
Reduce the lead times from order to delivery
Order batching
Order batching occurs when sales reps fill end-of-period sales quotas, or when buyers spend end-of-year budgets
Solution is to use frequent and smaller order size. Firms can order smaller quantities of a variety of items from a supplier or use a freight forwarder to consolidate small shipments
Price fluctuations
Reduce price fluctuations through forward buying activities to take advantage of the low price offers between:
* Retailers and consumers
* Distributers and retailers
* Manufacturers and Distribution
Eliminate price discounting – Many retailers have adopted everyday low prices
E.g. Bunnings, Jetstar, VietJet Air
Vendor-managed Inventory: VMI is an inventory management approach in which a supplier or vendor (the inventory seller) manages and maintains the inventory, even after the inventory is in the retailer’s (the inventory buyer’s) warehouse. The supplier takes all inventory-related decisions and replenishes inventory levels for the retailer.
Capacity is
a. determined by lean manufacturing.
b. the maximum amount of square footage available for inventory storage in a facility.
c. determined by raw materials flows.
d. the maximum amount of work that an organization is capable of completing in a given
period of time.
d. the maximum amount of work that an organization is capable of completing in a given
Which is NOT a major challenge for many established manufacturers?
a. competition
b. customer demand
c. expanding product life cycles
d. pressure for efficiency
c. expanding product life cycles
