CHAPTER ONE
Discussion Questions
1 Consider the purchase of a can of soda at a convenience store. Describe the
various stages in the supply chain and the different flows involved.
When a customer purchases a can of soda at a convenience store, his or her
purchase represents the end of a supply chain’s delivery of an item and the
beginning of information regarding his or her purchase flowing in the opposite
direction.
The supply chain stages include customers, retailers, wholesalers/distributors,
manufacturers, and component/raw material suppliers. A customer’s
purchase moves product toward the customer and dollars and information
toward the retailer.
The retailer places an order from the wholesaler/distributor to replenish
stock, thereby moving information back up the supply chain while moving
product down the supply chain. As the order is filled, the retailer will move
dollars back up the supply chain.
The wholesaler/distributor transmits information and dollars to the
manufacturer who produces product and ships it down the supply chain to the
wholesaler.
Finally, (or initially, depending on your perspective) the manufacturer moves
orders (information) and dollars toward suppliers in exchange for material
flow into their production processes.
2 Why should a firm such as Dell take into account total supply chain profitability
when making decisions?
Dell realizes that its ultimate success lies with the success of its supply chain
and its ability to create value and generate supply chain surplus. If Dell was to
view supply chain operations as a zero sum game, it would lose its
competitive edge as its suppliers’ businesses struggled. Dell’s profit gained at
the expense of its supply chain partners would be short lived. Just as a
physical chain is only as strong as its weakest link, the supply chain can be
successful only if all members cooperate and focus on a global optimum rather
than many local optima. Real value creation occurs if Dell and its supply chain
partners can together run the supply chain more effectively.
3 What are some strategic, planning, and operational decisions that must be made by
an apparel retailer such as Gap?
As Gap plans supply chain strategy it must first consider the marketing
function’s pricing and product plans in order to structure a supply chain
consistent with these plans. Strategic considerations such as the capacity of
each supplier and assembly operations, sourcing decisions, and how logistics
are to be handled are all part of the design. The supply chain must also settle
on communication channels and frequencies.
Supply chain planning takes the strategic decisions as a given and seeks to
exploit efficiencies in the chain to maximize supply chain surplus. The entire
chain should collaborate in forecasting and planning production to achieve a
global optimum. The forecasts should take into account planned promotions
and known seasonal fluctuations in demand.
The operational decision takes the plans as a given and makes day-to-day
decisions to process customer orders, allocate resources to certain
customers, trigger orders from supply chain members, and deliver product.
4 Consider the supply chain involved when a customer purchases a book at a
bookstore. Identify the cycles in this supply chain and the location of the push/pull boundary.
All supply chain processes can be broken down into four process cycles that
connect the five stages of the supply chain; the customer order cycle, the
replenishment cycle, the manufacturing cycle, and the procurement cycle.
The customer order cycle connects the customer with the retailer; this
connection is made as the book, perhaps Supply Chain Management by
Chopra and Meindl, is selected and paid for by the customer.
The replenishment cycle connects the retailer and the distributor and is
triggered by the retailer’s need to fill the empty shelf space with another copy
of this tome.
The manufacturing cycle connects the distributor and the manufacturer. As
demand for the book is realized and distributors empty their warehouses,
they signal the manufacturer to print another million copies to fill their empty
warehouses.
Finally, the procurement cycle connects the manufacturer and the supplier. The
manufacturer requires raw material inputs of paper, ink, and so on, to begin the
assembly process for another batch of Supply Chain Management. The push/pull
boundary exists where demand switches from reactive (pull) to speculative (push)
production. For most bookstore supply chains, the push/pull boundary is between
the customer order cycle and the replenishment cycle. The customer order pulls
the book from the book store shelf but the initial
production of the book was triggered by a build order that moved
materials along the supply chain to the retail outlet.
5 Consider the supply chain involved when a customer orders a book from Amazon.
Identify the push/pull boundary and two processes each in the push and pull phases.
In Amazon’s original operations design, the push/pull boundary existed
betwixt the retailer (Amazon) and their distributor. Amazon ordered product
from the distributor and the customer order arrived. Today, Amazon has
almost one 100 warehouses where it stocks an inventory of items it is
confident that will sell. In this scenario, the push/pull boundary exists between
the customer and the retailer.
Processes in the pull phase are the order fulfillment, shipping, customer
returns, and customer billing. Processes in the push phase are
production, stock replenishments, shipping, and payment.
6 In what way do supply chain flows affect the success or failure of a firm such as
Amazon? List two supply chain decisions that have a significant impact on supply chain
profitability.
The success or failure of a company such as Amazon is decided by the
effective function of its supply chain. The flow of products from publishers
to distributors to customers must be rapid and reliable in order to satisfy
customers. The goal is to effectively match supply and demand. The flow of
information back through the supply chain allows all members to coordinate
efforts. The flow of money allows all supply chain members to maintain
operations. Supply chain profitability is influenced by location of facilities,
inventory, sourcing, promotion, and fulfillment decisions.