(Week 12) Supply chain management
The bullwhip effect
- There are dynamics that exist between firms in supply chains that cause errors, inaccuracies and volatility the further upstream in the supply chain (hierarchy). - A small disturbance at one end of the chain causes increasingly large disturbances at it works its way towards the end.
How to reduce the 'bullwhip' effect
- Transmitting information throughout the chain so that all the operations can monitor true demand, free of these distortions. - Implement a system where sales data from checkouts or cash registers are consolidated and transmitted to the warehouses, transportation companies and supplier manufacturing operations that form the supply chain.
How should Supply chains compete?
All stages in the various chains that form the supply network must eventually include consideration of the final customer. When a customer decides to make a purchase, am action is triggered back along the whole series of supply chains in the network. All the businesses in the supply network pass on portions of that end customer's money to each other, retaining a margin for the value it has added.
Contract-based transactional relationships advantages
Definition: Purchasing goods and services in a 'normal' market fashion seeking the 'best' supplier. Price often dominates the decision making process and there is no guarantee of further trading between the parties once goods are delivered. - Maintain competition between alternative suppliers. This promotes a constant drive between suppliers to provide best value. - Suppliers owe little loyalty to customers. If supply is difficult, there is no guarantee of receiving supply
How is the demand side managed?
Demand side relationships will depend partly on the nature of demand in particular how uncertain it is. Knowing the exact demands that customers are going to require allows a supplier to plan its own internal processes in a systematic manner. For example, if 200 bicycles are to be manufactured on a particular day, then it is simple to calculate that 400 tyres will be demanded from the plant.
How is the supply side managed?
The ability of any process or operation to produce outputs is dependent on the inputs it receives. When a decision to buy products is made, managers must decide on sourcing strategies for different products and services, select appropriate suppliers, manage ongoing supply and improve suppliers' capabilities over time.
What is supply chain management?
Supply chain management (SCM) is the management of the relationships and flows between the 'string' of operations and processes that produce value in the form of products and services of the consumer.
Supply chain vs Supply network
Supply network: All the operations that are linked together so as to provide products and services through to customers. Within supply networks there can be many hundreds of supply chains of linked operations?
How should relationships in supply chains be managed?
The 'relationship' between operations in a supply chain is the basis on which the exchange of products, services, information and money is conducted. Managing supply chains is about managing relationships. Contract-based transactional relationships involve purchasing goods and services in a 'pure' market fashion. often seeking the 'best' supplier every time it is necessary to make a purchase.