Setting Product Availability for Multiple Products Under Capacity Constraints in a Supply Chain

In our discussion up to this point, we have assumed that a firm can set its desired level of product availability, and no constraints interfere with this choice. A common scenario in which this assumption fails occurs when the desired level of product availability results in an order size that exceeds the available capacity

2 Comments

Setting Optimal Levels of Product Availability in a Supply Chain in Practice

Beware of preset levels of availability. Often, companies have a preset target of prod­uct availability without any justification. In such a situation, managers should probe the rationale for the targeted level of product availability. A manager can provide significant value by adjust­ing the targeted level of product availability to one that maximizes profits. Use

5 Comments

The Need for Speed at Winner Apparel

Tiffany Chen was concerned about Winner Apparel’s sales results from the previous season. For some prod­ucts, the company had to sell about a third of the sea­sonal purchase at sharply discounted prices. For other products, the company ran out of stock well before the end of the season. Tiffany wanted to improve the match­ing

2 Comments

The Role of Transportation in a Supply Chain

Transportation refers to the movement of product from one location to another as it makes its way from the beginning of a supply chain to the customer. Transportation is an important supply chain driver because products are rarely produced and consumed in the same location. Transpor­tation is a significant component of the costs incurred

2 Comments

Modes of Transportation and Their Performance Characteristics in a Supply Chain

Supply chains use a combination of the following modes of transportation: Air Package carriers Truck Rail Water Pipeline Intermodal Commercial freight activity in the United States by mode in 2002, along with the value added by each mode to GDP in 2009, are summarized in Table 14-1. Before discussing the various modes, it is

1 Comments

Supply Chain Transportation Infrastructure and Policies

Roads, seaports, airports, rail, and canals are some of the major infrastructural elements that exist along nodes and links of a transportation network. In almost all countries, the government has either taken full responsibility or played a significant role in building and managing these infra­structure elements. Improved infrastructure has played a significant role in

3 Comments

Design Options for a Supply Chain Transportation Network

The design of a transportation network affects the performance of a supply chain by establishing the infrastructure within which operational transportation decisions regarding scheduling and routing are made. A well-designed transportation network allows a supply chain to achieve the desired degree of responsiveness at a low cost. Three basic questions need to be considered

4 Comments

Trade-Offs in Supply Chain Transportation Design

All transportation decisions made by shippers in a supply chain network must take into account their impact on inventory costs, facility and processing costs, the cost of coordinating operations, and the level of responsiveness provided to customers. For example, Amazon’s use of package carriers to deliver products to customers increases transportation cost but allows

2 Comments

Tailored Transportation in a Supply Chain

Tailored transportation is the use of different transportation networks and modes based on cus­tomer and product characteristics. Most firms sell a variety of products and serve many different customer segments. For example, W.W. Grainger sells more than 400,000 MRO supply products to both small contractors and large firms. Products vary in size and value,

1 Comments

The Role of IT in Supply Chain Transportation

The complexity and scale of transportation makes it an excellent area within the supply chain for the use of IT systems. The use of software to determine transportation routes has been the most common IT application in transportation. This software takes the location of customers, ship­ment size, desired delivery times, information on the transportation

1 Comments

Making Transportation Decisions in a Supply Chain in Practice

Align transportation strategy with competitive strategy. Managers should ensure that a firm’s transportation strategy supports its competitive strategy. They should design functional incentives that help achieve this goal. Historically, the transportation function within firms has been evaluated based on the extent to which it can lower transportation costs. Such a focus leads to decisions

3 Comments

Designing the Distribution Network for Michael’s Hardware

Ellen Lin, vice president of supply chain at Michael’s Hardware, was looking at the financial results from the past quarter and thought that the company could signifi­cantly improve its distribution costs, especially given the recent expansion into Arizona. Transportation costs had been very high, and Ellen believed that moving away from LTL shipping to

2 Comments

The Future of Same-Day Delivery: Same as the Past?

Ed Hendrix, vice president of supply chain at 4Farmers, a large mixed-feed company in the Netherlands, Europe, was reading a new scientific report from CED (an inde­pendent research and advisory company specializing in environmental impacts) that analyzed the environmental effects of the importing of raw materials. 4Farmers is a modern international company producing feed

Selecting Transportation Modes for China Imports

Jackie Chen, vice president of China Imports, was look­ing to design a framework to select transportation modes for various products imported from China to the United States. His basic options were to either use air freight or ocean shipping in 20-foot containers. Air freight was faster and more reliable, but ocean shipping was much

2 Comments

The Role of Sourcing in a Supply Chain

Purchasing, also called procurement, is the process by which companies acquire raw materials, components, products, services, or other resources from suppliers to execute their operations. Sourcing is the entire set of business processes required to purchase goods and services. For any supply chain function, the most significant decision is whether to outsource the function

1 Comments

In-House or Outsource in a Supply Chain?

The decision to outsource is based on the growth in supply chain surplus provided by the third party and the increase in risk incurred by using a third party. A firm should consider outsourcing if the growth in surplus is large with a small increase in risk. Performing the function in-house is preferable if

3 Comments

Examples of Successful Third-Party Suppliers

The assembly of consumer electronics is an activity that was largely performed in-house until the 1990s. Today, however, assembly is mostly outsourced by original equipment manufacturers (OEMs) such as Apple. In the 1990s, Macintosh computers were assembled at an Apple factory. Today, Apple tablets and smartphones are all assembled by electronics manufacturing service (EMS)

2 Comments

Total Cost of Ownership in a Supply Chain

When making the outsourcing decision or comparing suppliers, many firms make the fundamental mistake of focusing only on the quoted price, ignoring the fact that many factors affect the total cost of using a supplier. For instance, suppliers have different replenishment lead times. Does it pay to select a more expensive supplier with a

1 Comments

Supplier Selection in a Supply Chain – Auctions and Negotiations

Before selecting suppliers, a firm must decide whether to use single sourcing or multiple suppli­ers. Single sourcing guarantees the supplier sufficient business when the supplier must make a significant buyer-specific investment. The buyer-specific investment may take the form of plant and equipment designed to produce a part that is specific to the buyer or

Sharing Risk and Reward in the Supply Chain

In this chapter so far, we have emphasized the fact that all sourcing decisions should be made with the goal of growing the supply chain surplus. In practice, however, many firms care less about growing the surplus and more about what share of the surplus they are able to capture. As firms gain greater