SCM Chapter 1 - Discussion Questions & Answers
- 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 purchase represents the end of a supply chain’s delivery of an item and the beginning of information regarding his 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 towards the customer and dollars and information towards 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. Asthe order is filled, the retailer will move dollars backup the supply chain.
The wholesaler/distributor transmits information and dollars to themanufacturerwho produces products andships it down the supply chain tothe wholesaler. Finally (or initially, depending on your perspective) themanufacturer moves orders (information) and dollars towards suppliers in exchange for material flow into their production processes.
- 2. Why should a firm like 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 generate supply chainsurplus. If Dell was to view supply chain operations as a zero-sum game, they would lose their competitive edge as theirsuppliers’ 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 canbe successful only if all members cooperate and focus on a global optimum rather than many local optima.
- 3. What are some strategic, planning, and operational decisions that must be made by an apparel retailer like The Gap?
The Gap plans supply chainstrategy it must first consider the marketing function’s pricing plans in order to structure a supply chainconsonant with theseplans. Strategic considerations such as the capacity of each supplier and assembly operations, sourcing decisions, and how logistics are to behandled are all part ofthe design. The supply chainmust also settle on communication channels and frequencies. Supply chain planning takesthe strategic decisions as a given and seeksto exploit efficiencies in the chain to maximize supply chainsurplus. 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.
- 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. 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, etc., to begin the assemblyprocess for another batchof Supply Chain Management.
When a customer purchases a book from the book store, a complete supply chain cycle that involves procurement, manufacturing, distribution, replenishment, and customer delivery takes place. The different supply chain cycles are quite separated in this case because eachcycle occurs at the interface between two successive stages of the supply chain. The five supply chain stages reflect the work and involvement of five individual parties however the bookstore accounts for only the retailer stage because it serves noother functions within the supply chain.
Pull processes mean aprocess is initiated in response tocustomer order. Push processes, onthe other hand,the mean process is initiated in anticipation of customer orders. The push/pull boundary in any supplychain separates push processes from pull processes.The push/pull boundary forthe bookstore occurs between the customer order cycle and theprocurement, manufacturing, andreplenishment cycles. The customer order cycle is a pull process because all processes the customer order cycle is executed only after the customer arrives. The remaining processes all take place prior to the customer arriving so that allproducts are already in inventory built up in anticipation ofcustomer orders.
- 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 a product from the distributor and the customer order arrived. Today, Amazon has six 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 like Amazon? List two supply chain decisions that have a significant impact on supply chain profitability.
The success or failure of a company like Amazon is decided by the effective function of its supply chain.The flow ofproducts from publishers todistributors to customers must be rapid and reliable in order to satisfy customers. The flow ofinformation 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 sourcing, promotion, and fulfillment decisions.
