Case Study : Supply Chain Management

Supply chain management is a complex process. There are several issues that can lead to the bullwhip effect and those issues can be exacerbated by delays in transmitting information, and a lack of coordination up and down the supply chain. Some causes of the bullwhip effect include:

Recognized as one of the leading computer manufacturers, Dell uses an astonishing supply chain through pull-to-order procurement and just-in-time inventory management. Their strategy is highly efficient and drives costs to a minimum while allowing for minimal lead times and production times of under 4 hours for each order as their suppliers maintain levels of inventory based on forecasts within Dell warehouses near Dell assembly

Supply Chain Management: An International Journal, Volume 7, Number 5, 2002, pp. 271 – 282;

Barilla, the leading pasta manufacturer in Italy, faces increasing problems related to demand fluctuation. Their distributors also suffer from high inventory holding costs and low service levels on the other hand. This report explains, why the company and their distributors are troubled with this situation and how Barilla intends to solve it. The problem Barilla experiences is called the “Bullwhip Effect”, i.e. that demand variability increases when moving up the supply chain. Several factors enforce this Bullwhip Effect, e.g. high lead times, poor demand forecasting, and batch ordering. In this report we will point out, that exactly those aspects can be identified as the underlying reasons for Barilla’s problems. In a

Raising maximum distributor order, more than customer demand is one good choice made in the three games. According to the supply chain order, the maximum distributor order totals to 15units compared to a maximum demand of 9units. These figures prove that backordering costs will not occur during business operations. Good inventory management techniques require placing adequate orders to reduce backordering costs. The cost and time of backordering affects operations and hence the need to adequate inventory to match demand changes. An average customer order of 7units compared to average distributor order of 5units points to low backordering costs. A minimum customer order of 4units means that market demand is under control from

Company is facing a challenge of potentially higher inventory costs. Rising prices may further result in changes in customer behavior and preferences.

The customers, wholesalers and retailers may order in large quantities with the expectation that they will receive a greater allocation of products that are in short supply. The impact on the supply chain is significant as the forecasted demand is greatly, and unrealistically, increased with these inflated orders. Eventually orders disappear and cancellations pour in, making it impossible for the manufacturer to determine the real demand for its products

The lean supply chain helps to imrprove efforts focusing waste, improve manufacturing schedule and economically produce small quantities. It is also flexible to react to changes in the market. Hence, BMW has this facility of allowing a customer to change its order within a week of placing and still maintain the original delivery time and high quality. Similarly, agile supply chain helps in carrying a generic inventory. The best part is that it helps in reducing risk of keeping too much stock as well as being out of stock. Mass-customization can be easily pursued through an agile supply chain which offers variety at a lower total

The supply and management of a company have various difficulties in trying to manipulate the logistics of supply and making analysis of the whole performance of the supplying team. These issues apparently result from low surge and have had great inconveniences to stock and management. The reasons for these intensive difficulties are a result of malfunctioning of one group or department and thus disrupting the paths of supply. Prior to lack of frequency in stock-outs, poor customer response and high prices on the products of the supplying enterprise have the greatest impact then due customers. This

I am a little unsure why the element of ordering costs would have been left out of the equation except for the added variability to inventory it would cause. But since it was left out of the game, the inventory was allowed to be kept lower than if ordering costs remained in the game. Since there were no ordering costs, inventory was ordered on almost every cycle within the supply chain. Reaction of inventory fluctuations within the system or the bullwhip effect is another focus of what the game teaches. If ordering costs were in play it may distort the effect. With no ordering costs the bullwhip effect is evident.

Effective supply chain management can provide an important competitive advantage for a business marketer, resulting in improved communication and involvement among members of the chain, increased motivation, and decreased costs. Tracking the movement of and demand for components used to manufacture a product across a variety of potential and actual suppliers, provides insight and the ability to respond instantly to shortages, surpluses, and changes in market conditions. It seeks to optimize production, decrease manufacturing time, minimize inventory, streamline order fulfillment, and reduce cost.

M&L Manufacturing makes various components for printers and copiers. The company supplies these items to a major manufacturer. The company also distributes these and similar items to office supply stores and computer stores as replacement parts for printers and desktop copiers. In all, the company manufactures about 20 different items to distribute. The two markets (the major manufacturer and the replacement market) require somewhat different handling. Product for the major manufacturer can be shipped in bulk. However, the products for the retail segment must be packaged individually which requires additional handling and expense. Instead of using forecasting for production planning the operations manager decides which

This phenomenon is called “batching orders” and it is one of the causes of the Bullwhip effect.

The class text states that Supply chain management is frequently divided into supply chain planning applications, supply chain execution applications, logistics management, and warehouse management. Often when companies fail at implementing an efficient supply chain because of the planning section, or inaccurate demand forecasts. The text states electronic data interchange is one of the earliest uses of information technology for supply chain management, Electronic data interchange is the use of the Internet for everyday business transactions. “In this era of information a firm’s supply chain should operate at speed of thought and this is possible only by enhanced e-speed communications and information sharing with their critical partners.” (4)

Some companies like Dell and Apple directly sell their products to customers without involving a distributor and hence get a better idea about the actual sales and demand of their products. Finally as was seen that long resupply lead times aggravate the bullwhip effect. Improving operational efficiencies and just in time replenishments can mitigate the effect.