Order Strategy Planning and Operation Assignment

Order Strategy Planning and Operation Assignment
10.1 Describe supply chain coordination and the bullwhip effect, and their impact on supply chain performance.
10.2 Identify obstacles to coordination in a supply chain.
10.3 Discuss managerial levers that help achieve coordination in a supply chain.
10.4 Understand some practical approaches to improve coordination in a supply chain.
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Order Strategy Planning and Operation Assignment
Lack of Supply Chain Coordination and Its Impact on Performance
Supply chain coordination – all stages of the chain take actions that are aligned and increase total supply chain surplus
Requires that each stage share information and take into account the effects of its actions on the other stages
Lack of coordination results when:
Objectives of different stages conflict
Information moving between stages is delayed or distorted
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Bullwhip Effect (1 of 2)
Fluctuations in orders increase as they move up the supply chain from retailers to wholesalers to manufacturers to suppliers
Distorts demand information within the supply chain
Results from a loss of supply chain coordination
Order Strategy Planning and Operation Assignment
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Bullwhip Effect (2 of 2)
Figure 10-1 Demand Fluctuation at Different Stages of a Supply Chain
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The Effect on Performance (1 of 2)
Lack of coordination increases variability and hurts supply chain surplus
Impact on costs
Manufacturing cost
Inventory cost
Replenishment lead time
Transportation cost
Labor cost for shipping and receiving
Level of product availability
Relationships across the supply chain
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The Effect on Performance (2 of 2)
Table 10-1 Impact of the Lack of Coordination on Supply Chain Performance
Performance Measure Impact of the Lack of Coordination
Manufacturing cost Increases
Inventory cost Increases
Replenishment lead time Increases
Transportation cost Increases
Shipping and receiving cost Increases
Level of product availability Decreases
Profitability Decreases
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Order Strategy Planning and Operation Assignment
Summary of Learning Objective 1
Supply chain coordination requires all stages to take actions that maximize total supply chain profits. A lack of coordination results if different stages focus on optimizing their local objectives or if information is distorted as it moves across the supply chain. The phenomenon that fluctuation in orders increases as one moves up the supply chain from retailers to wholesalers to manufacturers to suppliers is referred to as the bullwhip effect. This effect results in an increase in all costs in the supply chain and a decrease in customer service levels. The bullwhip effect moves all parties in the supply chain away from the efficient frontier and results in a decrease of both customer satisfaction and profitability within the supply chain.
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