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