Supply Chain Management Simulation Debrief Flashcards
What is a Purchase Order?
This is the “paperwork” where the buyer documents and requests the quantity needed from the seller.
Which way do purchase orders flow?
Upstream
Which way do products flow?
Downstream
Can customer demand be blamed for problems?
No
What happens when there is a lack of communication / cooperation in SCM?
Guessing consumer demand, which leads to arbitrary ordering decisions. Here, the result is the bullwhip effect.
What is the bullwhip effect?
When information (orders) going back through the supply chain is distorted and then amplified.
How does a long lead time affect decision making?
Panic: when inventory does not instantly arrive and solve your growing backlog, you panic and order even more.
What are the business implications of the supply chain structure?
Stockouts at times
Excess inventory at times
Overtime costs
Layoffs / Re-hiring costs
Expediting
How does the supply chain structure lead to higher end prices for the consumer?
The supply chain structure leads to high costs throughout the supply chain, leading to a higher end price for the consumer.
How is the bullwhip effect measured?
It is measured through variance amplification, which is present if the bullwhip measure is greater than 1.
What is the formula to measure the bullwhip effect?
Bullwhip = Variance of Orders / Variance of Demand
How can we improve the supply chain through Communication & Cooperation?
Actual consumer demand = information technologies
Incentives to share information (lower unit cost for actual data)
Vendor Managed Inventory
Forecasting = Collaborative planning forecasting and replenishment (CPFR)
How can we improve lead time in SCM?
Administration (Ordering) Lead Time = Information Technology
Physical manufacturing Lead Time = Just-In-Time production systems, Small batches
Transportation Lead Time = Have suppliers geographically close by
What is on-shoring?
Domestic outsourcing where production takes place in your own country.
What is next-shoring?
Moving local production near demand (‘next to’).
What are the benefits of next-shoring?
Reduces logistics costs
Improves environmental performance
Reduces length of lead times
Reduces variability of lead times
Easier to identify local needs
Consumer perception: “jobs in home country”
What if you cannot change the supply chain structure?
The Aspirin Rule - You are inherently aware of the “lead time”, and don’t panic.
How can we avoid the supply chain problems present in the Beer Game Simulation?
Change the supply chain structure (if possible)
If you cannot change the supply chain structure: Adapt
Choose “capable” suppliers (don’t focus on cost)
What are the key learnings from the Beer Game Simulation?
Smooth your supply chain
‘Everyday low prices’ is ideal approach for SCM
What are the characteristics seen in the Beer Game Graphs?
Fluctuation
Amplification
Time Lag
