Designing managing supply chain 3e pdf

This is a clear example of conflicting marketing and manufacturing goals. Question 2 a. The supply chain for a consumer mortgage offered by a bank may involve various components. Marketing companies that handle solicitation to potential customers. Credit reporting agencies that evaluate potential customers. The bank that extends the mortgage loans.

Mortgage brokers through which the loans are distributed. The marketing companies strive to increase the response rate from homebuyers in order to maximize their returns.

Banks aim at a customer portfolio with a relatively low risk, healthy flow of payments and low average loan maturity date. The brokers would like to maximize their sales commissions. Similar to product supply chains, the objective of a service supply chain is to provide what is needed in this case, a particular type of service, rather than a physical product at the right location, at the right time, and in a form that conforms to customer requirements while minimizing systemwide costs.

However, there are a number of differences between the two types of supply chains. For instance: 1. In a product supply chain, there is both a flow of information and physical products. In a service supply chain, it is primarily information. Contrary to a service supply chain, transportation and inventory are major cost components in a product supply chain.

Services typically cannot be held in inventory, so matching capacity with demand is frequently more important in a service supply chain. In a service supply chain, the explicit cost of information is higher than in a product supply chain. Note that in the mortgage example above, the bank has to compensate the credit reporting agency for each credit report it obtains.

Question 3 Many supply chains evolve over time. For example, consider a memory chip supply chain. Production strategies may change during different stages of the product life cycle. Consequently, production is usually done at plants close to markets, and the management focuses on increasing yield, reducing the number of production disruptions, and fully utilizing capacity.

When the product matures, however, its price drops and demand is stabilized for a period of time, so minimizing production cost moves to center stage. To reduce costs, production may be outsourced to overseas foundries, where labor and materials are much cheaper.

Question 4 A vertically integrated company aims at tighter interaction among various business components, and frequently manages them centrally. Such a structure helps to achieve systemwide goals more easily by removing conflicts among different parts of the supply chain through central decision making.

In a horizontally integrated company, there is frequently no benefit in coordinating the supply chains of each business within the company. Indeed, if every business specializes in its core function, and operates optimally, an overall global optimum may be approached. Question 5 Effective supply chain management is also important for vertically integrated companies.

In such an organizational structure, various business functions are handled by different departments of the company that usually have different internal objectives, and these objectives are not necessarily aligned with each other. This may be due to lack of communication among departments or the incentives provided by the upper management.

Effective supply chain management is still necessary to achieve globally optimal operations. Question 6 The sources of uncertainty in this example include: 1. Factors such as weather conditions, diseases, natural disasters cause uncertainty in availability of raw materials, i. Uncertain lead times during transportation of crop from the field to the processing facility may affect the quality of peaches, e. Processing times in the plant, as well as the subsequent warehousing and transportation times are subject to uncertainty.

Demand is not known in advance. Question 7 A small number of centrally located warehouses allows a firm to take advantage of risk pooling in order to increase service levels and decrease inventory levels and costs. However, outbound transportation cost is typically higher, and delivery lead times are longer. On the other hand, by building a larger number of warehouses closer to the end customers, a firm can decrease outbound transportation costs and delivery lead times.

However, this type of system will have increased total inventory levels and costs, decreased economies of scale, increases warehousing expenses, and potentially increased inbound transportation expenses. Question 8 The choice of the particular transportation service depends largely on the types and sizes of products the company wants to transport, the inventory and delivery strategies and the need for flexibility: 1. A truckload carrier is better if delivering bulky items or small items in large and stable quantities from warehouses to demand points stores.

A good example is the delivery of groceries from warehouses to supermarkets. Note that in this case we would like the demand to be in increments of full truck loads. Additionally, a package carrier company offers more flexibility by different modes of transportation depending on the needs of the individual customers. Question 9 1. High inventory levels i. Advantages: High fill rate service level and quick order fulfillment.

Disadvantages: High opportunity cost of capital tied in inventory, danger of price declines over time and obsolescence, need for more warehouse space.

Low inventory levels i. Advantages: Low inventory holding and warehousing costs. Disadvantages: Higher risk of shortages and lower service levels. Question 10 Building redundancy into the supply chain means that if one portion fails, the supply chain can still satisfy demand. This is the biggest advantage of building redundancy in the supply chain. Alternate sources of supply, provision for alternate transportation and distribution modes, alternate warehouses are some of the ways by which redundancy can be built.

A disadvantage of this policy is that excess capacity is built into the system in order to hedge against emergencies that may disrupt the supply — if these capacities are not used over time and if too much capacity is built as redundant capacity, the costs to the supply chain increases. Other ways by which redundancy can be built is by using information to better sense and respond to disruptive events, incorporating flexibility into supply contracts to better match supply and demand and improving supply chain processes by including risk assessment measures Question 11 Inefficiencies in distributing products from the factories to the customers is primary reason why both costs have increased.

The two are related as the longer the time it takes to move products from one point to the next in the supply chain, the higher will be the transportation costs — in addition, the inventory costs will be higher as more products would be stocked in the pipeline between the suppliers and the customers.

CASE: Meditech Surgical Question 1 Meditech experiences poor service levels for new products, and inventory levels higher than necessary for all products.

Question 2 There are many causes for these problems: 1. Demand is not studied in detail. Information systems that record and monitor demand and inventory are poorly designed. Forecasting errors are not tracked. There is a tendency to shift the blame to the customers, e. There are built-in delays and monthly buckets in the planning system. The planning system amplifies small variations in demand.

Question 3 The customer service manager is directly exposed to the complaints from the customers. Hence, he is in a good position to gauge the scope of the problems. Other managers do not face the customers, and they do not necessarily focus on their satisfaction. Question 4 1. Recognize that demand is predictable, and establish better forecasting systems and accountability for forecasts.

Institute better planning systems to eliminate planning delays; reduce the size of system time buckets. Alternatively, put assembly within the pull system and eliminate bulk inventory completely.

Develop and implement better information systems. Improve communications with customers. Specifically the following points are reviewed in the chapter.

Strategies related to how firms cope with huge variability in customer demand are discussed. The relationship between service levels and how much inventory to carry is important. In addition, the effect of lead time and the variability in lead time has an effect on the inventory levels. Finally, different inventory policies are discussed — the policies differ with respect to the different scenarios that may be present for a particular item or a specific partnership between two firms. Please see the chapter's PowerPoint presentation for case discussion.

Question 3 In general, higher inventory levels make it easier to maintain higher service levels. However, modern inventory management techniques may make it possible to increase service levels without increasing inventory levels as much as in the past. Therefore, for a given service level, inventory levels increase with longer lead times and higher lead time variance. Question 5 The target service level depends on the mission-criticality of the product. For instance, consider a service parts vendor for equipment for which every hour of down time is very expensive.

Market conditions also play an important role in determining target service levels. For commodities, we would expect relatively high service levels since customers can switch products easily if they do not find the particular product they look for.

However, a lower service level may be acceptable if the product has a clear value differentiation compared to its competitors. For instance, customers of a high-end server that is clearly deemed superior to the rest of the market may be willing to wait for weeks if the manufacturer is out-of-stock.

See Figure Question 8 Possible items for discussion are as follows: 1. Get BOOK. In particular, the authors attempt to convey the intuition behind many key supply chain concepts and to provide simple techniques that can. Designing and Managing the Supply Chain. National Meeting. The Illustrated London News.