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1、Designing and Managing the Supply ChainDavid Simchi-L 印 i Philip Kaminsky Edith Smchi L 印 iSolutions for Discussion Questions1Kerem BulbulWe would like to thank Shiming Deng for his valuable contributions to the preparation of this manual.Chapter 1Introduction to Supply ChainM anagementDiscussion Qu
2、estionsQuestion 1Pick any car model manufactured by a domestic auto maker.For example,consider the 2002 FordThunderbird.a.The supply chain for a car typically includes the following components:1.Suppliers for raw materials2.Suppliers for parts and subsystems3.Automobile manufacturer(Ford,in this exa
3、mple).Within a company,there are alsodifferent departments,which constitute the internal supply chain:i.Purchasing and material handingii.Manufacturingiii.Marketing,etc.4.Transportation providers5.Automobile dealersb.Many firms are involved in the supply chain.1.Raw material suppliers.For instance,s
4、uppliers for steel,rubber,plastics,etc.2.Parts suppliers.For instance,suppliers for engines,steering wheels,seats,and electroniccomponents,etc.3.Automobile manufacturer.Fbr instance,Ford.4.Transportation providers.For instance,shippers,trucking companies,railroads,etc.5.Automobile dealers.Fbr exampl
5、e,Hayward Ford.c.All companies involved in the supply chain want to maximize their respective profits byincreasing revenue and decreasing cost.However,companies may employ different strategiesin order to achieve this goal.Some of them focus on customer satisfaction and quick delivery,while others ma
6、y be more concerned about minimizing inventory holding costs.d.In general,different parts of the supply chain have objectives that are not aligned with eachother.1.Purchasing:Stable order quantities,flexible delivery lead times and little variation in mix.22.Manufacturing:Long production runs,high q
7、uality,high productivity and low productioncosts.3.Warehousing:Low inventory,reduced transportation costs and quick replenishmentcapability.4.Customers:Short order lead times,a large variety of products and low prices.Typically,the automobile dealer would like to offer a variety of car colors and co
8、nfigurationsto accommodate different customer preferences,and meanwhile have a short delivery lead timefrom the manufacturer.However,in order to maximize the length of production runs,andutilize resources more efficiently,the manufacturer would like to aggregate orders fromdifferent dealers and offe
9、r less variety in car configurations.This is a clear example ofconflicting marketing and manufacturing goals.Question 2a.The supply chain for a consumer mortgage offered by a bank may involve various components:1.Marketing companies that handle solicitation to potential customers.2.Credit reporting
10、agencies that evaluate potential customers.3.The bank that extends the mortgage loans.4.Mortgage brokers through which the loans are distributed.b.The marketing companies strive to increase the response rate from homebuyers in order tomaximize their returns.Banks aim at a customer portfolio with a r
11、elatively low risk,healthyflow of payments and low average loan maturity date.The brokers would like to maximizetheir sales commissions.c.Similar to product supply chains,the objective of a service supply chain is to provide what isneeded(in this case a particular type of service,rather than a physi
12、cal product)at the rightlocation,at the right time,and in a form that conforms to customer requirements whileminimizing systemwide costs.However,there are a number of differences between the twotypes of supply chains.For instance:1.In a product supply chain,there is both a flow of information and ph
13、ysical products.In aservice supply chain,it is primarily information.2.Contrary to a service supply chain,transportation and inventory are major cost componentsin a product supply chain.3.Services typically cannot be held in inventory,so matching capacity with demand isfrequently more important in a
14、 service supply chain.4.In a service supply chain,the(explicit)cost of information is higher than in a product supplychain.Note that in the mortgage example above,the bank has to compensate the creditreporting agency for each credit report it obtains.Question 3Many supply chains evolve over time.For
15、 example,consider a memory chip supply chain.Production strategies may change during different stages of the product life cycle.When a newmemory chip is introduced,price is high,yield is low,and production capacity is tight,and theavailability of the product is important.Consequently,production is u
16、sually done at plants closeto markets,and the management focuses on increasing yield,reducing the number of productiondisruptions,and fully utilizing capacity.When the product matures,however,its price drops anddemand is stabilized for a period of time,so minimizing production cost moves to center s
17、tage.To reduce costs,production may be outsourced to overseas foundries,where labor and materialsare much cheaper.Question 4A vertically integrated company aims at tighter interaction among various business components,and frequently manages them centrally.Such a structure helps to achieve systemwide
18、 goals moreeasily by removing conflicts among different parts of the supply chain through central decisionmaking.In a horizontally integrated company,there is frequently no benefit in coordinating thesupply chains of each business within the company.Indeed,if every business specializes in itscore fu
19、nction,and operates optimally,an overall global optimum may be approached.Question 5Effective supply chain management is also important fbr vertically integrated companies.In suchan organizational structure,various business functions are handled by different departments of thecompany that usually ha
20、ve different internal objectives,and these objectives are not necessarilyaligned with each other.This may be due to lack of communication among departments or theincentives provided by the upper management.For instance,if the sales department is evaluatedbased on revenue only,and the manufacturing d
21、epartment is evaluated based on cost only,thecompanys profit may not be maximized globally.Effective supply chain management is stillnecessary to achieve globally optimal operations.Question 6The sources of uncertainty in this example include:1.Factors such as weather conditions,diseases,natural dis
22、asters cause uncertainty in availabilityof raw materials,ie,peach crop.2.Uncertain lead times during transportation of crop from the field to the processing facility mayaffect the quality of peaches,e.g.,they m 耳 get spoiled.3.Processing times in the plant,as well as the subsequent warehousing and t
23、ransportation timesare subject to uncertainty.4.Demand is not known in advance.Question 7A small number of centrally located warehouses allows a firm to take advantage of risk poolingin order to increase service levels and decrease inventory levels and costs.However,outboundtransportation cost is ty
24、pically higher,and delivery lead times are longer.On the other hand,bybuilding a larger number of warehouses closer to the end customers,a firm can decrease outboundtransportation costs and delivery lead times.However,this type of system will have increasedtotal inventory levels and costs,decreased
25、economies of scale,increases warehousing expenses,and potentially increased inbound transportation expenses.Question 8The choice of the particular transportation service depends largely on the types and sizes ofproducts the company wants to transport,the inventory and delivery strategies and the nee
26、d forflexibility:1.A truckload carrier is better if delivering bulky items or small items in large and stablequantities from warehouses to demand points(stores).A good example is the delivery ofgroceries from warehouses to supermarkets.Note that in this case we would like the demandto be in incremen
27、ts of full truck loads.2.A package delivery firm is more appropriate if relatively small items are delivered from themanufacturer/warehouse directly to the customers.Additionally,a package carrier companyoffers more flexibility by different modes of transportation depending on the needs of theindivi
28、dual customers.Question 91.High inventory levelsi.Advantages:High fill rate(service level)and quick order fulfillment.ii.D is advant ages:High opportunity cost of capital tied in inventory,danger of pricedeclines over time and obsolescence,need for more warehouse space.2.Low inventory levelsi.Advant
29、ages:Low inventory holding and warehousing costs.ii.Disadvantages:Higher risk of shortages and lower service levels.Case Discussion Questions-editech SurgicalQuestion 1Meditech experiences poor service levels for new products,and inventory levels higher thannecessary for all products.Question 2There
30、 are many causes for these problems:1.Demand is not studied in detail.2.Information systems that record and monitor demand and inventory are poorly designed.3.Forecasting errors are not tracked.4.There is a tendency to shift the blame to the customers,e.g.,panic ordering.5.There are built-in delays
31、and monthly buckets in the planning system.6.The planning system amplifies small variations in demand.7.Poor communication with customers;Meditech doesnt typically see end-customer demand.Question 3The customer service manager is directly exposed to the complaints from the customers.Hence,he is in a
32、 good position to gauge the scope of the problems.Other managers do not face thecustomers,and they do not necessarily focus on their satisfaction.Question 41.Recognize that demand is predictable,and establish better forecasting systems andaccountability for forecasts.2.Institute better planning syst
33、ems to eliminate planning delays;reduce the size of system timebuckets.3.Alternatively,put assembly within the pull system and eliminate bulk inventory completely.4.Develop and implement better information systems.5.Improve communications with customers.6Chapter 2Logistics Network ConfigurationDiscu
34、ssion QuestionsQuestion 1The factors that affect the performance of the logistics network are not Static,i.e.,they changeover time.These factors include demand,product design,various costs in the logistics network,regulations,contracts,etc.The effects of these dynamics need to be evaluated periodica
35、lly inorder to determine whether the existing configuration is still satisfactory given the new operatingenvironment.For instance,service level requirements may change due to increased competition whichtypically means that the lead time to fulfill customer orders needs to be shortened.This mayrequir
36、e the firm to redesign its logistic network and build new warehouses that are closer to theend customers.Question 2The design of the logistics network is a strategic decision that has long lasting effects andimpacts all functions witliin the company.For the success of such a project,many levels of t
37、heorganization must be involved:1.Upper Management:The new design must be aligned with the vision and strategic goals ofthe company.Additionally,such a project may be costly,so management buy-in is essentialto ensure that sufficient resources are devoted to the project.2.Sales and Marketing:Demand f
38、orecasts and anticipated changes in product design andofferings affect the network and need the involvement of sales and marketing teams.3.Manufacturing and Operations:The logistics network design has obvious impact on day-today operation of the firm.In order for the implementation to succeed,it is
39、essential that thepeople involved with operating the system on a daily basis are involved in its design.Question 3The decision that a single warehouse will be built has been made up-front.Therefore,we onlyneed to focus on the location and capacity of the warehouse,and determine how much spaceshould
40、be allocated to each product in the warehouse.The main steps of the analysis are outlinebelow.1.Data collectioni.Location of retail stores,existing warehouses(5 warehouses located in Atlanta,Boston,Chicago,Dallas and Los Angeles),manufacturing facilities(a single manufacturing7facility in San Jose),
41、and suppliers.ii.Candidate locations for the new warehouse.iii.Information about products,i.e.,their sizes,shapes and volumes.iv.Annual demand(past actuals and future estimates)and service level requirements of theretail stores.v.Transportation rates by available modes.vi.TYansportation distances fr
42、om candidate warehouse locations to retail stores.vii.Handling,storage and fixed costs associated with warehousing.Fixed costs should beexpressed as a function of warehouse capacity.viii.Fixed ordering costs,order frequencies and sizes by product or product family.2.Data aggregation.Demand needs to
43、be aggregated based on distribution patterns and/orproduct types.Replace aggregated demand data points by a single customer.3.Mathematical model building.4.Model validation based on existing network structure.5.Selection of a few low cost alternatives based on the mathematical model.i.For the final
44、decision,incorporate qualitative factors that were disregarded in themathematical model,e.g.,specific regulations,environmental factors,etc.ii.Optionally,build a detailed simulation model to evaluate these low cost candidatesolutions.6.Decide where to locate the centralized warehouse.With the centra
45、lized warehouse,service level will increase(less stock-outs)and inventoryholding costs will decrease due to risk pooling.Also,fixed costs associated with warehousingwill typically decrease,and inbound transportation costs from the manufacturing facility to thewarehouse should be less than the sum of
46、 the previous inbound transportation costs.However,we will incur increased outbound transportation costs from the central warehouse to the retailers.In summary,the essential design trade-off is between transportation costs on one hand,andinventory holding costs and service level requirements on the
47、other.Question 4a.In automobile manufacturing,cars are usually delivered over land,and demand is concentrated around major cities.Therefore,we would expect warehouses in this industry to belocated near large cities with easy access to freeways and raihoads.This would help to reducethe delivery lead
48、time to dealerships in the cities.b.In the pharmaceutical industry,overnight delivery is common.Therefore,proximity to amajor airport is a factor that should be considered when choosing a warehouse location.Additionally,for raw material warehouses it is important that these are close to naturalresou
49、rces.c.In the book industry,supplier warehouse locations would be affected by the availability ofnearby natural resources.8d.In the aircraft manufacturing industry,sub-assemblies and parts are delivered by thousandsof suppliers scattered all over the globe to the manufacturing facilities.Therefore,f
50、br thesesupplier warehouses,by far the most significant consideration is the ability to ship parts easilyand on-time,i.e.,the proximity to railroads,freeways,harbors,etc.In such a capital intensiveindustry,we would also expect that regulations such as tax breaks have an impact on potentialwarehouse