Download - Ch06supply Chain Integration 1
-
8/3/2019 Ch06supply Chain Integration 1
1/34
McGraw-Hill/Irwin Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 6
Supply Chain
Integration
-
8/3/2019 Ch06supply Chain Integration 1
2/34
1-2
6.1 Introduction
6.1
Introduction
-
8/3/2019 Ch06supply Chain Integration 1
3/34
1-3
6.2 Push, Pull, Push-Pull
Systems6.2 Push, Pull, Push-Pull
Systems
-
8/3/2019 Ch06supply Chain Integration 1
4/34
1-4
Bull whip Effect
The bullwhip effect (or whiplash effect) is an observed phenomenon in forecast-driven distribution
channels. It refers to a trend of larger and larger swings in inventory in response to changes in
demand, as one looks at firms further back in the supply chain for a product.
Since the oscillating demand magnification upstream a supply chain is reminiscent of a cracking
whip, it became known as the bullwhip effect.
WHY BULL WHIP HAPPENS?
Because customer demand is rarely perfectly stable, businesses must forecast demand to
properly position inventory and other resources. Forecasts are based on statistics, and they are
rarely perfectly accurate. Because forecast errors are a given, companies often carry an inventory
buffer called "safety stock".
Moving up the supply chain from end-consumer to raw materials supplier, each supply chain
participant has greater observed variation in demand and thus greater need for safety stock. In
periods of rising demand, down-stream participants increase orders. In periods of falling demand,
orders fall or stop, thereby not reducing inventory. The effect is that variations are amplified as
one moves upstream in the supply chain (further from the customer)
Behavioral causes
* misuse of base-stock policies
* misapplication of trinomial theorem
* misperceptions of feedback and time delays
* panic ordering reactions after unmet demand
-
8/3/2019 Ch06supply Chain Integration 1
5/34
1-5
Bull whip Cont'd
Operational causes * dependent demand processing
o Forecast Errors
o adjustment of inventory control parameters with each demand observation
* Lead time Variability (forecast error during replenishment lead time)
* lot-sizing/order synchronization
o consolidation of demands
o transaction motive
o quantity discount
* trade promotion and forward buying
* anticipation of shortages
o allocation rule of suppliers
o shortage gaming (including dereliction underBenford's Law)
o Lean and JIT style management of inventories and a chase production strategy
-
8/3/2019 Ch06supply Chain Integration 1
6/34
1-6
Effect ofBull Whip
In addition to greater safety stocks, the
described effect can lead to either
inefficient production or excessive
inventory as the producer needs to fulfill
the demand of its predecessor in the
supply chain. This also leads to a low
utilization of the distribution channel. Inspite of having safety stocks there is still
the hazard of stock-outs which result in
poor customer service. Furthermore, the
Bullwhi effect leads to a row of financial
-
8/3/2019 Ch06supply Chain Integration 1
7/34
1-7
Push-Based Supply Chains
Push-Based Supply Chains
-
8/3/2019 Ch06supply Chain Integration 1
8/34
1-8
Bullwhip Effect in Push-Based
Supply ChainsBullwhip Effect in Push-Based
Supply Chains
-
8/3/2019 Ch06supply Chain Integration 1
9/34
1-9
Pull-Based Supply Chains
Pull-Based Supply Chains
-
8/3/2019 Ch06supply Chain Integration 1
10/34
1-10
Implementation of Pull-Based
SystemsImplementation of Pull-Based
Systems
-
8/3/2019 Ch06supply Chain Integration 1
11/34
1-11
Push-Pull Strategy
Push-Pull Strategy
-
8/3/2019 Ch06supply Chain Integration 1
12/34
1-12
Supply Chain Timeline
FIGURE 6-8:Push-pull supply chains
-
8/3/2019 Ch06supply Chain Integration 1
13/34
1-13
General Strategy
General Strategy
-
8/3/2019 Ch06supply Chain Integration 1
14/34
1-14
Identifying the Appropriate Supply
Chain Strategy
FIGURE 6-9:Push-pull supply chains
-
8/3/2019 Ch06supply Chain Integration 1
15/34
1-15
Impact of Demand Uncertainty and
Economies of Scale
Impact of Demand Uncertainty and
Economies of Scale
-
8/3/2019 Ch06supply Chain Integration 1
16/34
1-16
Implementing a PushPull Strategy
Implementing a PushPull Strategy
-
8/3/2019 Ch06supply Chain Integration 1
17/34
1-17
mpac o e us - u
Strategy
Impact of the Push-Pull Strategy
-
8/3/2019 Ch06supply Chain Integration 1
18/34
1-18
Pull portion High uncertainty
Simple supply chain structure
Short cycle time Focus on service level.
Achieved by deploying a flexible and
responsive supply chain
Order-fulfillment processes are applied
Impact of the Push-Pull Strategy
-
8/3/2019 Ch06supply Chain Integration 1
19/34
1-19
Characteristics of the Push and
Pull Portions of the Supply Chain
Portion Push Pull
Objective Minimize cost Maximize service level
Complexity High Low
Focus Resource allocation Responsiveness
Lead time Long Short
Processes Supply chain planning Order fulfillment
-
8/3/2019 Ch06supply Chain Integration 1
20/34
1-20
Interactions of the Two Portions
Interactions of the Two Portions
-
8/3/2019 Ch06supply Chain Integration 1
21/34
1-21
6.3 The Impact ofLead Time
6.3 The Impact ofLead Time
-
8/3/2019 Ch06supply Chain Integration 1
22/34
1-22
Impact ofLead Time
FIGURE 6-10:Matching supply chain strategies with products:
the impact of lead time and demand uncertainty
-
8/3/2019 Ch06supply Chain Integration 1
23/34
1-23
Impact ofLead Time
Impact ofLead Time
-
8/3/2019 Ch06supply Chain Integration 1
24/34
1-24
6.4 Demand-Driven Strategies
6.4 Demand-Driven Strategies
-
8/3/2019 Ch06supply Chain Integration 1
25/34
1-25
Forecast Errors Are Always Present!
Forecast Errors Are AlwaysPresent!
-
8/3/2019 Ch06supply Chain Integration 1
26/34
1-26
6.5 The Impact of the Internet on
Supply Chain Strategies
6.5 The Impact of the Internet on
Supply Chain Strategies
-
8/3/2019 Ch06supply Chain Integration 1
27/34
1-27
Successes and Failures
Successes and Failures
-
8/3/2019 Ch06supply Chain Integration 1
28/34
1-28
E-Business
E-Business
-
8/3/2019 Ch06supply Chain Integration 1
29/34
1-29
Key Observations
Key Observations
-
8/3/2019 Ch06supply Chain Integration 1
30/34
1-30
Grocery Industry
Grocery Industry
-
8/3/2019 Ch06supply Chain Integration 1
31/34
1-31
Book Industry
Book Industry
-
8/3/2019 Ch06supply Chain Integration 1
32/34
1-32
General Retail Industry
General Retail Industry
-
8/3/2019 Ch06supply Chain Integration 1
33/34
1-33
Traditional Fulfillment Versus e-
Fulfillment
Traditional fulfillment E-fulfillment
Supply chain strategy Push Pushpull
Shipment Bulk Parcel
Reverse logistics Small part of the business Important and highly complex
Delivery destination Small number of storesLarge number of geographicallydispersed customers
Lead times Relatively long Relatively short
-
8/3/2019 Ch06supply Chain Integration 1
34/34
1-34
Summary
Summary