Designing and Managing the Supply Chain free essay sample

In a service supply chain, the (explicit) cost of information is higher than in a product supply chain. Note that in the mortgage example above, the bank has to compensate the credit reporting agency for each credit report it obtains. Question 3 Many supply chains evolve over time. For example, consider a memory chip supply chain. Production strategies may change during different stages of the product life cycle. When a new memory chip is introduced, price is high, yield is low, and production capacity is tight, and the availability of the product is important. Consequently, production is usually done at plants close to markets, and the management focuses on increasing yield, reducing the number of production disruptions, and fully utilizing capacity. When the product matures, however, its price drops and demand is stabilized for a period of time, so minimizing production cost moves to center stage. To reduce costs, production may be outsourced to overseas foundries, where labor and materials are much cheaper. Question 4 A vertically integrated company aims at tighter interaction among various business com- ponents, and frequently manages them centrally. Such a structure helps to achieve sys- temwide goals more easily by removing con? icts among different parts of the supply chain through central decision making. In a horizontally integrated company, there is frequently no bene? t in coordinating the supply chains of each business within the company. Indeed, if every business specializes in its core function, and operates optimally, an overall global optimum may be approached. Question 5 Effective supply chain management is also important for vertically integrated companies. In such an organizational structure, various business functions are handled by different departments of the company that usually have different internal objectives, and these objectives are not necessarily aligned with each other. This may be due to lack of com- munication among departments or the incentives provided by the upper management. For instance, if the sales department is evaluated based on revenue only, and the manufacturing department is evaluated based on cost only, the company. s pro? t may not be maximized globally. Effective supply chain management is still necessary to achieve globally optimal operations. The choice of the particular transportation service depends largely on the types and sizes of products the company wants to transport, the inventory and delivery strategies and the need for ? exibility: 1. A truckload carrier is better if delivering bulky items or small items in large and stable quantities from warehouses to demand points (stores). A good example is the delivery of groceries from warehouses to supermarkets. Note that in this case we would like the demand to be in increments of full truck loads. Additionally, a package carrier company offers more ? exibility by different modes of transportation depending on the needs of the individual customers. Question 9 1. High inventory levels i. Advantages: High ? ll rate (service level) and quick order ful? llment. ii. Disadvantages: High opportunity cost of capital tied in inventory, danger of price declines over time and obsolescence, need for more warehouse space. 2. The design of the logistics network is a strategic decision that has long lasting effects and impacts all functions within the company. For the success of such a project, many levels of the organization must be involved: 1. Upper Management: The new design must be aligned with the vision and strategic goals of the company. Additionally, such a project may be costly, so management buy-in is essential to ensure that sufficient resources are devoted to the project. Sales and Marketing: Demand forecasts and anticipated changes in product design and offerings affect the network and need the involvement of sales and marketing teams. . Manufacturing and Operations: The logistics network design has obvious impact on day- to-day operation of the ? rm. In order for the implementation to succeed, it is essential that the people involved with operating the system on a daily basis are involved in its design. Question 3 The decision that a single warehouse will be built has been made up-front. Therefore, we only need to focus on the location and capacity of the warehouse, and determine how much 7 space should be allocated to each product in the warehouse. In automobile manufacturing, cars are usually delivered over land, and demand is con- centrated around major cities. Therefore, we would expect warehouses in this industry to be located near large cities with easy access to freeways and railroads. This would help to reduce the delivery lead time to dealerships in the cities. b. In the pharmaceutical industry, overnight delivery is common. Therefore, proximity to a major airport is a factor that should be considered when choosing a warehouse location. Additionally, for raw material warehouses it is important that these are close to natural resources. c. In the book industry, supplier warehouse locations would be affected by the availability of nearby natural resources. d. In the aircraft manufacturing industry, sub-assemblies and parts are delivered by thou- sands of suppliers scattered all over the globe to the manufacturing facilities. Therefore, for these supplier warehouses, by far the most signi? cant consideration is the ability to ship parts easily and on-time, i. e. , the proximity to railroads, freeways, harbors, etc. In such a capital intensive industry, we would also expect that regulations such as tax breaks have an impact on potential warehouse locations. e. With a large customer base shopping for books on-line, short delivery lead times are crucial. Therefore, in book distribution, we would expect to ? nd large centralized ware- houses on reasonably priced land and where quick transportation modes are available. . Furniture manufacturing and distribution depends heavily on manual labor. Therefore, warehouses in this industry should be located close to cities with sufficient labor supply. g. In PC manufacturing, outsourcing from all around the world is common where labor is cheaper and regulations favor the huge investments associated with high-tech manufac- turing. These considerations should be factored in when choosing candidate warehouse locations. Question 5 In the pharmaceutical industry, we would expect more warehouses closer to the end cus- tomers for short delivery lead times.