Introduction
The integration activities taking place among a network of facilities that procure raw materials , transform them into intermediate goods and then final product and deliver product to customer through distribution channels.
Production:
Delivery status:
The tendency of the variability of orders rates to increase as they pass through the levels of a supply chain towards producers and raw material suppliers.
Price Fluctuation
Inflated Orders
Types of Information:
1. Centralized Demand Information Provide
each stage of supply chain with complete information on the actual customer demand.
Creates more accurate forecasts rather than orders received from the previous stage.
Cont
Types of Information:
2. Decentralized Demand Information Retailer
does not make its forecast information available to the remainder of the supply chain.
2. Reducing Variability:
4. Strategic Partnership:
supplier
A menu of prices for different capacity reservations
provided by supplier
Buyer signals true forecast by reserving a specific capacity
level
Cont
Advance Purchase Contract:
Supplier charges special price before building capacity When demand is realized, price charged is different Buyers commitment to paying the special price reveals
Effective Forecast
Three Golden Rule for Forecast are:
The forecast is always wrong.
Categories of Forecast
systems. The outputs from one system within the supply chain are the inputs to the next system. Trying to find the best set of trade-offs for any one stage isnt sufficient. Need to consider the entire system and coordinate decisions.
Cont
2. Systems are not coordinated: Each facility in the supply chain does what is best for that facility The result is local optimization.
Global Optimization
1. Issues:
Who will optimize? How will the savings obtained through the coordinated
Dealers have to order before demand is realized Centralized distribution system preferred mostly
Cont
2. Distributor Integration: Distributors are an important partner in the supply chain Distributors have a wealth of information about customers needs and wants Successful manufacturers can use this information when developing new products and product lines Distributors are integrated so that expertise and inventory located at one distributor is available to others.
Lead-Time Reduction
It is define as the time between placing an order and the receipt of goods ordered. Supply chain design that reduce lead-time: 1. Push-based supply chain - Production and distribution decision are based on long term
forecast
2. Pull-based supply chain - Production and distribution are demand driven so that they
are coordinated with true customer demand rather than forecast demand - Only respond to specific order
horizon.
4. Reduction in finished goods inventory levels.
Benefits of Information
Helps reduce variability in the supply chain.
Helps suppliers make better forecasts, accounting for
promotions and market changes. Enables the coordination of manufacturing and distribution systems and strategies. Enables retailers to better serve their customers by offering tools for locating desired items. Enables retailers to react and adapt to supply problems more rapidly. Enables lead time reductions.