Class 22: Zara, Fast Retailing & IT in SCM
Disintermediation
getting rid of intermediaries, or middlemen, in the supply chain. This lowers lag time and lowers cost which in turn reduces the Bullwhip effect
push demand
how business creates the "demand" to the public
pull demand
how public creates the "demand" to the business
Information System (IS):
integrated solution that combines 5 components: hardware, software, data, procedures, and people who interact are impacted by system
Just-in-time manufacturing
only creates items to meet demand. This lowers inventory so if products suck you don't have a lot of leftovers but if products are successful you don't have a lot to sell.
horizontal integration
only some aspects of value chain are controlled
vertical integration
the business controls all aspects of its value chain
They can reduce these risks by spreading facilities throughout the globe
Factors such as weather, natural disaster, terrorism, labor strife, or political unrest can shut down a firm's operations. Which of the following is one of the measures taken by firms to hedge such risks?
Contract Manufacturing:
Firms that use this don't own the plants or directly employ workers who produce the requested goods. Downside: contract firms may use sweatshops or unethical practices to save costs.
reduces risk by having other firms contribute to its value chain which reduces costs and results in lower prices
What are the advantages of horizontal integration?
reduces risk by having one firm in charge of the value chain which also speeds up the process
What are the advantages of vertical integration?
having multiple firms in value chain slows response time leaving it susceptible to the bullwhip effect. It may also be difficult to work with different firms who you have no control over and may resort to sketchy activity like sweatshops
What are the disadvantages of horizontal integration?
it expands risk by increasing responsibility of firm, if one area falls it may disrupt the entire system
What are the disadvantages of vertical integration?
Hardware, Software, Data, Process, and People
What are the five components that make up an information system?
Too little inventory equals less sales/profit
What happens when a retailer has too little inventory?
Too much inventory = death
Why is inventory management so important?
Point-of-Sale system
transaction processing systems that capture customer purchases
Bullwhip Effect
variability in order size and order timing increases at each stage up the supply chain