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Summary - Supply Chain Management Strategy, Planning, and Operation
Why does inventory exist?because of a mismatch between supply and demand, most of the time an intentional mismatch -> more economical to manufacture in large lots and then store for future sales
What is Little's Law?I = D * T
I = Inventory
D = Throughput (rate at which sales occur)
T = Flow Time (time between entering and existing in a supply chain for a material)
What is Cycle Inventory?average amount of inventory used to satisfy demand between receipts of supplier shipments
What is Safety Inventory?Inventory held in case demand exceeds expectation: it is held to counter uncertainty
What is Seasonal Inventory?Built up inventory to counter predictable seasonal variability in demand. It is build up in periods with low demand and stored for periods with high demand.
What is the level of product availability?It is the fraction of demand that is served on time from product held in inventory. High product availability -> high level of responsiveness but more costs because of more inventory.
4.1 The role of distribution in the supply chain
To what does distribution refer?the steps taken to move and store a product from the supplier stage to a customer stage in the supply chain. Distribution refers between every pair of stages in the supply chain.
4.2 Factors influencing distribution network design
Along which two dimensions should the performance of a distribution network be evaluated?
- value provided to the customer
- Cost of meeting customer needs
Give 7 measures, influenced by the structure of the distribution network, that influence customer service
- Response time
- Product variety
- Product availability
- Customer experience
- Time to market
- Order visibility
Give 4 supply chain costs that are affected when changing the distribution network design
- Facilities and handling
What is the difference between inbound and outbound transportation costs?Inbound are costs incurred for bringing the material into a facility
Outbound are costs incurred for sending the material out of a facility.
What are the Total logistics costs?the sum of the inventory, transportation and facility costs for a supply chain network.
4.3 Design options for a distribution network
Which two key decisions should managers make when designing a distribution network?
- Will product be delivered to the customer location or picked up from prearranged site?
- Will product flow through an intermediary location?
Give 6 distribution network designs
- Manufacturer storage with direct shipping, also called drop-shipping
- Manufacturer storage with direct shipping and in-transit merge, pieces order different locations merge
- Distributor storage with carrier delivery
- Distributor storage with last-mile delivery, means distributor delivers to home of customer instead of package carrier
- Manufacturer/Distributor storage with customer pickup, ordered before pickup
- Retail storage with customer pickup
see page 99
4.5 Distribution Networks in Practise
Give 4 things to take into account when managing a distribution network
- The ownership structure of the distribution network can have as big an impact as the type of distribution network
- It is important to have adaptable distribution networks
- Products price, commoditization, and criticality affect the type of distribution system preffered by customers
- Integrate the Internet with the existing physical network
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