Summary Designing and Managing the Supply Chain

ISBN-10 0071270973 ISBN-13 9780071270977
330 Flashcards & Notes
6 Students
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This is the summary of the book "Designing and Managing the Supply Chain". The author(s) of the book is/are David Simchi Levi. The ISBN of the book is 9780071270977 or 0071270973. This summary is written by students who study efficient with the Study Tool of Study Smart With Chris.

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Summary - Designing and Managing the Supply Chain

  • 1.1 What is supply chain management?

  • What is the definition of Supply Chain Management?
    Supply Chain Management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize systemwide costs while satisfying service level requirements.
  • Why is Supply Chain Management difficult?
    1. Supply chain strategies cannot be determine in isolation. They are directly affected by another chain that most organizations have.

    2. It is challenging to design and operate a supply chain so that total systemwide costs are minimized and systemwide service levels are maintained.

    3. Uncertainty and risk are inherent in every supply chain
  • 1.2 The development chain

  • What is the development chain?
    The development chain is the set of activities and processes associated with new product introduction. 
  • The Development Chain vs Supply Chain
    Includes the following:
    - Product design
    - Associated capabilities and knowledge that need to be developed internally
    - Sourcing decisions
    - Production plans
  • 1.3 Global optimization

  • What factors make finding the best systemwide, or globally optimal, integrated solution so difficult and a challenging problem?
    1. The supply chain is a complex network of facilities dispersed over a large geography, and, in many cases, all over the globe.

    2. Different facilities in the supply chain frequently have different, conflicting objectives.

    3. The supply chain is a dynamic system that evolves over time.

    4. System variations over time are also an important consideration.
  • 1.4 Managing uncertainty and risk

  • Global optimization is made even more difficult because supply chains need to be designed for, and operated in, uncertain environments, thus creating sometimes enormous risks to the organization. Which factors contribute to this?
    1. Matching supply and demand is a major challenge.

    2. Inventory and back-order levels fluctuate considerably across the supply chain, even when customer demand for specific products does not vary greatly.

    3. Forecasting doesn't solve the problem.

    4. Demand is not the only source of uncertainty. Delivery lead times, manufacturing yields, transportation times and component availability also can have significant supply chain impact.

    5. Recent trends such as lean manufacturing, outsourcing, and offshoring that focus on cost reduction increase risks significantly.
  • 1.5 The evolution of supply chain management

  • What happened during the 80s?
    Companies discovered new manufacturing technologies and strategies that allowed them to reduce costs and better compete in difficult markets. 
  • What happened during the 90s?
    Many companies focused on strategies to reduce their costs as well as those of their supply chain partners. At the same time, many supply chain partners engage in information sharing so that manufacturers are able to use retailers' up-to-date sales data to better predict demand and reduce lead times. 

    Another huge pressure to reduce costs and increase profits pushed many industrial manufacturers towards outsourcing

    Finally, in the late 90s, the Internet and the related e-business models led to expectations that many supply chain problems would be solved merely by using these new technologies and business models. 
  • What is happening nowadays?
    Companies discover that effective supply chain management is the next step they need to take in order to increase profit and market share.

    The e-business and Internet did not solve supply chain management problems, but to the contrary. In many cases, the downfall of some of the highest-profile Internet businesses can be attributed to their logistics strategies. 

    Over the past several years, progressive firms have started to focus on strategies that find the right balance between cost reduction and risk management.
  • Name a number of approaches that have been applied by industry to manage risk in their supply chains.
    • Building redundancy into the supply chain so that if one portion fails, the supply chain can still satisfy demand
    • Using information to better sense and respond to disruptive events
    • Incorporating flexibility into supply contracts to better match supply and demand
    • Improving supply chain processes by including risk assessment measures
  • 1.6 The complexity

  • Name the three critical abilities that successful firms must posses.
    1. The ability to match supply chain strategies with product characteristics.

    2. The ability to replace traditional supply chain strategies, in which each facility or party in the chain makes decisions with little regard to their impact on other supply chain partners, by those that yield a globally optimized supply chain. 

    3. The ability to effectively manage uncertainty and risk.
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Latest added flashcards

What does 3PL arrangements involve?
Modern 3PL arrangements involve long-term commitments and often multiple functions or process management.
Which two typical characteristics had relationships between the company and a third party for example trucking and warehousing?
  1. Transaction based
  2. Single-function specific
What is third-party logistics (3PL)?
Third-party logistics is simply the use of an outside company to perform all or part of the firm's materials management and product distribution functions.
What are core strengths?
Each company has its own core strengths. These are specific talents that differentiate the company from its competitors and give it an advantage in the eyes of its customers.
Which issues should be addressed when making a particular strategic alliance?
  1. Adding value to products
  2. Improving market access
  3. Strengthening operations
  4. Adding technological strength
  5. Enhancing strategic growth
  6. Enhancing organizational skills
  7. Building financial strength
What are the four basic ways for a firm to ensure that a logistics-related business function is completed?
  1. Internal activities - perform the activity with internal resources
  2. Acquisitions - acquire the resources externally
  3. Arm's-length transactions - this kind of short-term arrangement fulfills a particular business need but does not lead to long-term strategic change
  4. Strategic alliances - form partnerships with others
What are the attributes for the inventory at warehouses strategy?
It takes advantage of the risk pooling concept. Inbound costs are reduced. The allocation of products is delayed.
What are the attributes for the cross-docking strategy?
The transportation costs are reduced in the form of reduced inbound costs. Moreover, there are few to no holding costs. The allocation of products is delayed.
What is the attribute for the direct shipment strategy?
There are no holding warehouse costs.
When does transshipment make sense?
If the appropriate information systems exist, shipment costs are reasonable, and all of the retailers have the same owner. The system is them effectively taking advantage of the risk-pooling concept, even if no central warehouse exists, because one can view inventory in different retail outlets as part of a large, single pool.