Chapter 16 – Supply Chain Management
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Chapter 16
Supply Chain Management
Teaching Notes
This chapter introduces the concept of supply chain, its management, performance
measures and improvement approaches. As an extension of the systems point of view, the
system dynamics of the bullwhip effect inherent in the supply chain is discussed. This is
followed by the need for coordination across the supply chain to achieve the best performance of
the entire supply chain. Five areas where measurement of supply chain performance should be
made are described. These five areas are delivery, quality, flexibility, time, and cost. The basic
ways to improve supply chains by changing structure or systems are illustrated. The chapter
ends with a discussion of technology, supply chain risk and sustainability.
In teaching the chapter, it is helpful to illustrate the systems interactions in a supply chain
and show how supply chain performance can be measured and improved through the use of
concrete examples. The bullwhip effect can be illustrated through use of the Beer Game or
similar games. Current topics such as supply chain risk and sustainability have great interest to
students.
Answers to Questions
1. Supply chain management is the design and management of seamless, value-added
processes across organizational boundaries to meet the real needs of the customer. It
2. a. BIG MAC
suppliers of beef, vegetables, bread, etc.
transportation
factories and distribution centers
Chapter 16 – Supply Chain Management
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c. AUTOMOBILE REPAIR
suppliers of automobile repair tools and parts
transportation
3. How do lead times and forecast errors affect supply chain performance?
Delivery is one key measure of supply chain performance. Lead time can affect how
4. Coordination can be increased both internally to the firm and with customers and
suppliers by organizing cross-functional teams, partnerships with customers and
5. a. Total supply chain throughput time = 30 + 90 + 40 + 20 = 180 days
b. Supplier cash-to-cash cycle time = 30 + 20 – 30 = 20 days
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6. a.
D
i
f
D
Different metrics yield varying performance of the four supply chain participants. A
b. The improvements selected will depend on what supply chain measures are to be
improved. For example, if inventory improvement is desired, then look for the
elements in the supply chain that offer the greatest potential for reduction in days
of inventory without adversely affecting customer service. Improvements should
7. Structural changes are frequently long-range in nature and require considerable capital
while system changes are made within a given structure or configuration of the supply
8. Off-shoring is moving a product or part that a company is making to an offshore location.
The part or product is still be made by the same company. Out sourcing is giving a
Throughput
Time
Throughput
Rank
Cash-to–
cash
Cash-to–
cash rank
Added unit
cost
Added unit
cost rank
On time
delivery
On time
delivery
rank
Supplier
30 days
2
20 days
2
$10
3
85%
3
Factory
90 days
4
90 days
4
$25
2
95%
1
Wholesaler
40 days
3
10 days
1
$10
3
75%
4
Retailer
20 days
1
23 days
3
$30
1
95%
1
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9. Aspects of lean such as 5S, stabilizing the master schedule and setup time reduction have
a powerful effect on the entire supply chain. When setup time can be dramatically
reduced, it will be possible to produce economically in small lot sizes. This will result in
reduction in inventory, faster inventory turnover, less uncertainty and shorter
10. Cross-functional teams provide coordination that is lacking across various departments
and functions of a business and the various parties in a supply chain. Since coordination
11. Companies can use order placement to enter orders into their systems. It begins with
offering information to customers in order to choose the items they wish to purchase.
Once the customer chooses an item, the order is checked to see if it has been correctly
entered, if the item is in stock, and when it can be delivered. If the order is for an item
12. A company can insure it has a resilient supply chain by planning for disruptions in
advance, detecting them early, and acting quickly. This is done in three stages: proactive
planning, minimize the damage and post-disruption recovery. What can be done in each
of these stages is shown in Table 16.1 For example, the proactive planning stage
Chapter 16 – Supply Chain Management
13. Some examples of sustainability goals are:
Reduce carbon emissions by 5% a year over the next 10 years.
Decrease the tonnage sent to a land-fill by 10% over the next 5 years