Supply Chain, Trade-Offs, Bullwhip, SCOR, Forecasting Accuracy Flashcards
Supply Chain Planning
Please list three potential sources of uncertainty affecting the supply chain.
** Demand Uncertainty:**
* Fluctuations in customer demand can be unpredictable, making it challenging to maintain optimal inventory levels and meet customer needs efficiently.
** Supply Uncertainty:**
* Variability in the supply of raw materials or components due to supplier reliability, lead times, and external factors such as geopolitical issues or natural disasters.
** Process Uncertainty:**
* Variations in internal processes, including manufacturing variability, machine breakdowns, and inefficiencies that can disrupt the smooth flow of goods through the supply chain.
Supply Chain Planning
Please describe the Product Variety-Inventory Trade-Off.
How can the negative impact of this trade-off be reduced by the use of advanced information technology and innovative process design?
*The Product Variety-Inventory Trade-Off *refers to the balance between offering a variety of products and the costs for maintaining their inventory.
To reduce the negative impact of this trade-off, companies can:
** Inventory Optimization: **
advanced inventory management systems to optimize stock levels.
* Modular Design:
Implement modular product designs that allow customization with minimal components.
** Demand Analysis: **
Conduct thorough demand analysis to predict which variants are most likely to be in demand.
** Supplier Collaboration: **
Work closely with suppliers to improve lead times and reduce order quantities.
** Just-in-time (JIT) and lean principles ** emphasize reducing waste and improving efficiency throughout the supply chain.
These strategies help balance the need for product variety with the costs of inventory management.
Supply Chain Planning
Please describe the Trade-Off between Company Costs and Customer Service. How can the negative impact of this trade-off be reduced using advanced information technology and innovative process design?
The trade-off between company costs and customer service is a critical balancing act in business operations. On one side, companies strive to minimize costs to maintain profitability and competitiveness. On the other side, high-quality customer service often requires investments in faster delivery, personalized services, and maintaining higher inventory levels, which can increase costs.
1. Advanced Information Technology:
* Customer Relationship Management (CRM) Systems: CRM systems help companies understand customer needs and preferences, with less costs.
* Supply Chain Management (SCM) Software: Advanced SCM software enables better coordination among suppliers, manufacturers, and retailers, reducing lead times and costs while improving service levels.
** 2. Innovative process design:**
* Business Process Management (BPM) and innovative designs like Vendor Managed Inventory (VMI) can streamline operations, reduce waste, and enhance flexibility, thus improving service while controlling costs.
* Just-In-Time (JIT) Inventory
Bullwhip
Explain three major causes of the bullwhip effect and describe the negative consequences for companies
Bullwhip Effect Causes:
Forecasting Errors:
Order Batching:
*Price Fluctuations: *
Negative Consequences:
Overstocking or understocking
Increased costs
Customer Impact: harms customer satisfaction
Bullwhip, SCOR
Previous Question:
Explain three major causes of the bullwhip effect and describe the negative consequences for companies
Describe the potential of SCOR in this context.
SCOR Potential:
** Process Standardization:** SCOR standardizes supply chain processes, improving efficiency.
** Performance Measurement: **
It provides metrics for assessing supply chain performance.
** Best Practices: **
SCOR offers a framework for implementing supply chain best practices.
These elements are crucial for understanding and mitigating the bullwhip effect in supply chains. SCOR can be a valuable tool for companies looking to optimize their supply chain operations and reduce the negative impacts of the bullwhip effect.
Inventory types
Differentiate two types of inventories and explain the function of each inventory types.
Working stock / cycle inventories
Function: Decoupling of serial process steps
Economical benefit:
Supply:
Quantity discount, decrease of ordering costs, security of supply
Production:
Savings by decreasing set-up costs, avoidance of idle capacity costs
Safety stock
Function:
* Maintenance of service level while demand and lead time are stochastic variables
Economical benefit:
- Reduction of stockouts
* Avoidance of contribution margin losses and good-will losses
* Avoidance of special transports, express production orders, overtime
* Avoidance of additional set-up-costs caused by production changeover
Seasonal stock
Function
Demand: Cover demand peaks (seasonality, promotion campaigns)
Supply: Buffering of seasonal produced goods (e.g. agricultural products)
Economical benefit
- Decrease in set-up costs- Harmonization of production capacities / capacity smoothing
* Overtime / Short time work → working time → balancing problem
* Balanced capacity utilization → machinery resources → balancing problem - Savings in terms of additional external purchasing cost
Forecasting push-pull business
Discuss the importance of forecasting accuracy for a push-driven business compared to pull-driven businesses
Push vs. Pull: The push system forecasts demand and schedules production in advance, while the pull system initiates production in response to actual demand.
Therefore, while forecasting accuracy is important for both types of businesses, it is more critical for push-driven businesses due to their reliance on forecasts for production planning and inventory control. Pull-driven businesses benefit from accurate forecasts by enhancing responsiveness and efficiency.
SCOR
What is SCOR??
Supply Chain Operations Reference model (SCOR), is a framework used to evaluate and improve supply chain performance. The model is widely used by organizations to enhance supply chain efficiency and effectiveness through:
-process standardization
-measurement
-benchmarking
It includes:
-key performance indicators (KPIs)
- metrics to assess effectiveness.
VMI
What is VMI??
Vendor Managed Inventory (VMI), refers to a business model where the supplier is responsible for maintaining the inventory levels at the customer’s location. The supplier monitors the stock and ensures that the customer has the necessary inventory to meet demand.
CPFR
What’s CPFR??
Collaborative Planning, Forecasting, and Replenishment (CPFR), is a business practice where* multiple trading partners* in a supply chain collaborate to forecast demand, plan inventory levels, and replenish stock in a coordinated manner to improve supply chain efficiency.
Sourcing, Outsourcing
What are sourcing and outsourcing??
- Sourcing (→ procurement, purchasing)- Acquisition of goods (working assets: raw material, semi-finished material, finished goods and longterm-assets: e.g.machinery and equipment)
- Outsourcing (→ business development)- Transfer of an organizational function to a third party
The Role of Logistics Service Provider
What do third-party logistics (3PL) service providers offer??
A logistics service provider, also known as third-party logistics (3PL) provider, is a company that specializes in
offering services to help manage the supply chain including warehouse management, order fulfillment, and shipping
orders.
Logistics service providers offer:
Ø Inventory management
Ø Warehousing solutions
Ø Order fulfilment
Ø International logistics
Ø Freight shipping
Ø Supply chain management
Ø Transportation services
Explain Additive Manufacturing (3D printing) impact on transportation processes (e.g. long-distance, last mile), warehousing (raw materials, semi-finished and final products) and the processing of customer orders compared to the traditional way.
Transportation Processes:
- AM reduces long-distance transportation as products are printed on-demand near the point of consumption.
- For last-mile delivery, AM enables quicker response times and efficient routes with fewer warehouse stops.
Warehousing:
- AM decreases raw material storage needs by using materials efficiently and producing parts on-demand.
- Leads to smaller, strategically located warehouses, reducing large inventories of semi-finished and final products.
Order Processing:
- AM supports personalized, customized products, shifting from mass production to a customer-centric approach.
- Products are manufactured post-order, creating a more agile and responsive supply chain.
Short Description of VMI Processes and Operations from Supplier-Customer diagram.
the supplier takes over the responsibility of managing the customer’s inventory. The customer provides the supplier with inventory and forecast data through an ERP system. The supplier uses this data for ** inventory control and requirements planning. ** The supplier processes orders and sends dispatch notifications to the customer. The customer then receives the goods and updates their inventory data.
Main Technological and Organisational Prerequisites for VMI
** Technological Prerequisites: **
1. ERP Systems: Both supplier and customer need robust ERP systems to share inventory and forecast data.
2. EDI (Electronic Data Interchange): Secure and efficient data transfer between the supplier and customer systems.
3. Real-time Data Access: Systems that allow real-time access to inventory levels and sales data.
** Organisational Prerequisites: **
1. Trust and Collaboration: Strong partnership and trust between the supplier and customer.
2. Clear Communication Channels: Established communication protocols and channels.
3. Defined Roles and Responsibilities: Clear understanding of responsibilities in the VMI process to avoid confusion and ensure smooth operation.
