CHAPTER 7 SUPPLY REQUIREMENT (Key issues in supply chain? (3) Supply…
Key issues in supply chain
3) Supply Chain integration and Strategic Partnering
This is concerned with the complex issue of strategic inter organizational partnership for achieving competitive advantage. This is about sharing the information and efficient use of the information for coordinating business process to deliver a superior value to the customers
4) Distribution strategy
The distribution strategy is concerned with the distribution of the firm's products. There are several strategies available such as the classical distribution strategy or direct shipping
5) Product Design
This is concerned with the design of the product and its impact on total cost of the product. It is possible that the design determines the strategies to be followed regarding inventory or transportation
2) Inventory Control
This is concerned with the levels of inventory to be held at various points in the supply chain. As inventory represents costs, the sensible approach is to hold as low an inventory as possible but business are forced to hold inventories as a buffer to counter the affects of an uncertain demand.
6) Customer Value
The key issue is the definition of customer value in an age of increasing consumer power. It is mentioned on how supply chain will be designed to provide value to the customers and how will firms define the value
Configuration of distribution network
This issue deals with the design of a distribution network to serve a specific market. This will consists of a set of warehouses and retail outlets, together with the manufacturing plant and supply sources,based on considerations of location and capacity of each of these elements
7) Supply contract
Relationship between suppliers and buyers are established by means of supply contracts that specify pricing and volume discounts, delivery lead times, quality, returns and so forth.
8) Information technology and decision support system
Information technology is a critical enabler of effective SCM. Much of the current interest in SCM is motively by the opportunities that appeared due to the abundance of data and the savings that can be achieved by sophisticated analysis of these data
Driver of risk in Supply Requirement
:star: High capacity utilization at supply source
:star: Inflexibility of supply source
:star:Information infrastructure breakdown
:star:Extensive system networking
:star:Inaccurate forecast due to long lead times
:star:Short life time
The bullwhip effect can be explained as an occurrence detected by the supply chain where orders sent to the manufacturer and supplier create larger variance then the sales to the end customer
What contributes to bullwhip effect?
Lack of communication
Between each link in the supply chain makes it difficult for processes to run smoothly. Managers can perceive a product demand quite differently within different links of the supply chain and therefore order different quantities.
which is companies may not immediately place an order with their supplier ,often accumulating the demand first.Companies may order weekly or even monthly.This creates variability in the demand as there may.For instance be a surge in demand at some stage followed by no demand after.
between supply chain link, with ordering larger or smaller amounts of a a products than is needed due to an over or under reaction to the supply chain beforehead
Free return policies
which is customer may intentionally overstate demands due for processes 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.
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