chopra_scm5_ch10
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Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall . 10-2
Lack of Supply Chain Coordination and the Bullwhip Effect
• Supply chain coordination – all stages of the • •
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-15
Managerial Levers to Achieve Coordination
• Aligning goals and incentives • Improving information accuracy • Improving operational performance • Designing pricing strategies to stabilize •
– Objectives of different stages conflict – Information moving between stages is delayed or distorted
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-3
Bullwhip Effect
• 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
10-12
Pricing Obstacles
• When pricing policies for a product lead • •
to an increase in variability of orders placed Lot-size based quantity decisions Price fluctuations
Replenishment lead time Transportation cost
Shipping and receiving cost Level of product availability Profitability
Increases Increases
Increases Decreases Decreases
The Effect on Performance
• Supply chain lacks coordination if each stage optimizes only its local objective • Reduces total profits • Performance measures include
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:
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-13Pricing O Nhomakorabeastacles
Figure 10-3
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
•
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-4
Demand at Different Stages
Figure 10-1
10-5
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
– Manufacturing cost – Inventory cost – Replenishment lead time – Transportation cost – Labor cost for shipping and receiving – Level of product availability – Relationships across the supply chain
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-8
Incentive Obstacles
• Occur when incentives offered to
different stages or participants in a supply chain lead to actions that increase variability and reduce total supply chain profits Local optimization within functions or stages of a supply chain Sales force incentives
Table 10-1
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-7
Obstacles to Coordination in a Supply Chain
• Incentive Obstacles • Information Processing Obstacles • Operational Obstacles • Pricing Obstacles • Behavioral Obstacles
orders Building strategic partnerships and trust
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-6
The Effect on Performance
Performance Measure Manufacturing cost Inventory cost Impact of the Lack of Coordination Increases Increases
Learning Objectives
1. Describe supply chain coordination and the bullwhip effect, and their impact on supply chain performance. 2. Identify obstacles to coordination in a supply chain. 3. Discuss managerial levers that help achieve coordination in a supply chain. 4. Understand the different forms of collaborative planning, forecasting, and replenishment possible in a supply chain.
10
Coordination in a Supply Chain
PowerPoint presentation to accompany Chopra and Meindl Supply Chain Management, 5e
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall . 10-1 1-1
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-11
Operational Obstacles
Figure 10-2
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
• •
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-10
Operational Obstacles
• Occur when placing and filling orders • • •
lead to an increase in variability Ordering in large lots Large replenishment lead times Rationing and shortage gaming
10-9
•
•
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
Information Processing Obstacles
• When demand information is distorted
as it moves between different stages of the supply chain, leading to increased variability in orders within the supply chain Forecasting based on orders, not customer demand Lack of information sharing
10-14
Behavioral Obstacles
•
Problems in learning within organizations that contribute to information distortion
1. Each stage of the supply chain views its actions locally and is unable to see the impact of its actions on other stages 2. Different stages of the supply chain react to the current local situation rather than trying to identify the root causes 3. Different stages of the supply chain blame one another for the fluctuations 4. No stage of the supply chain learns from its actions over time 5. A lack of trust among supply chain partners causes them to be opportunistic at the expense of overall supply chain performance
Lack of Supply Chain Coordination and the Bullwhip Effect
• Supply chain coordination – all stages of the • •
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-15
Managerial Levers to Achieve Coordination
• Aligning goals and incentives • Improving information accuracy • Improving operational performance • Designing pricing strategies to stabilize •
– Objectives of different stages conflict – Information moving between stages is delayed or distorted
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-3
Bullwhip Effect
• 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
10-12
Pricing Obstacles
• When pricing policies for a product lead • •
to an increase in variability of orders placed Lot-size based quantity decisions Price fluctuations
Replenishment lead time Transportation cost
Shipping and receiving cost Level of product availability Profitability
Increases Increases
Increases Decreases Decreases
The Effect on Performance
• Supply chain lacks coordination if each stage optimizes only its local objective • Reduces total profits • Performance measures include
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:
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-13Pricing O Nhomakorabeastacles
Figure 10-3
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
•
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-4
Demand at Different Stages
Figure 10-1
10-5
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
– Manufacturing cost – Inventory cost – Replenishment lead time – Transportation cost – Labor cost for shipping and receiving – Level of product availability – Relationships across the supply chain
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-8
Incentive Obstacles
• Occur when incentives offered to
different stages or participants in a supply chain lead to actions that increase variability and reduce total supply chain profits Local optimization within functions or stages of a supply chain Sales force incentives
Table 10-1
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-7
Obstacles to Coordination in a Supply Chain
• Incentive Obstacles • Information Processing Obstacles • Operational Obstacles • Pricing Obstacles • Behavioral Obstacles
orders Building strategic partnerships and trust
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-6
The Effect on Performance
Performance Measure Manufacturing cost Inventory cost Impact of the Lack of Coordination Increases Increases
Learning Objectives
1. Describe supply chain coordination and the bullwhip effect, and their impact on supply chain performance. 2. Identify obstacles to coordination in a supply chain. 3. Discuss managerial levers that help achieve coordination in a supply chain. 4. Understand the different forms of collaborative planning, forecasting, and replenishment possible in a supply chain.
10
Coordination in a Supply Chain
PowerPoint presentation to accompany Chopra and Meindl Supply Chain Management, 5e
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall . 10-1 1-1
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-11
Operational Obstacles
Figure 10-2
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
• •
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
10-10
Operational Obstacles
• Occur when placing and filling orders • • •
lead to an increase in variability Ordering in large lots Large replenishment lead times Rationing and shortage gaming
10-9
•
•
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .
Information Processing Obstacles
• When demand information is distorted
as it moves between different stages of the supply chain, leading to increased variability in orders within the supply chain Forecasting based on orders, not customer demand Lack of information sharing
10-14
Behavioral Obstacles
•
Problems in learning within organizations that contribute to information distortion
1. Each stage of the supply chain views its actions locally and is unable to see the impact of its actions on other stages 2. Different stages of the supply chain react to the current local situation rather than trying to identify the root causes 3. Different stages of the supply chain blame one another for the fluctuations 4. No stage of the supply chain learns from its actions over time 5. A lack of trust among supply chain partners causes them to be opportunistic at the expense of overall supply chain performance