1. Supply Chain management Flashcards
(6 cards)
What is the definition of “Supply Chain Management (SCM)“?
“SCM is the integrated planning and controlling of material and service flows from raw material to the final customer. It includes all connected information and monetary flows with the objective of increasing customer satisfaction as well as optimizing costs and other logistical performance measures along the value chain.”
- SCM is a cooperation-oriented inter-organizational management concept
- The focus of SCM is the dedicated arrangement of the structures of procurement, production and distribution in a value chain
- Further objectives include information sharing and transparency as well as coordinated decision-making in the value chain
SCM focuses on the network of actors (suppliers, warehouses, manufacturers, distributors, retailers, etc) / value chain as a whole.
What are the goals of Supply Chain Management (SCM)?
- Increasing competitiveness of the companies involved in the supply chain (eg. cost, innovation, availability). As when two suppliers compete for a resourcing
- Optimization of the flows of materials, goods, and information of the whole value chain (leading to effectiveness and efficiency increases(
- Increase of customer services (faster delivery - time competition, increased availability, beneficial conditions)
Describe the Bullwhip Effect and how this led to the development of SCM.
The Bullwhip Effect is the phenomenon where small demand variations at the consumer end cause increasingly larger order fluctuations upstream in the supply chain. This amplification, due to distorted information and overreactions, leads to excessive inventory, higher costs, and inefficiencies. Recognizing its detrimental impact, businesses realized the need for integrated management. This led to SCM’s development, promoting information sharing, collaboration, and joint planning across the entire chain to dampen variability and create a smoother, more efficient flow.
A clear example of the Bullwhip Effect occurred during the COVID-19 pandemic with toilet paper. A slight increase in consumer panic-buying at the retail level led to empty shelves. Retailers, perceiving a huge surge in demand, placed disproportionately larger orders with distributors. These distributors, in turn, amplified their orders to manufacturers, fearing shortages. Manufacturers then ramped up production significantly, ordering more raw materials. As initial panic subsided, demand normalized, leaving manufacturers, distributors, and retailers with massive excess inventory, leading to warehousing costs and eventually discounts, illustrating the amplified variability.
What is the objective of the system dynamics methodology?
The purpose of System Dynamics is to help people understand complex and dynamic systems and help them make better decisions. The field provides a philosophy and tools to model and analyze dynamic systems. Equally important, the field provides techniques and tools to investigate current decision making and to help decision makers learn.
Feedback loops are basically chains of cause-and-effect relations that forms a loop where its output routes back to the chain as an input. Hence, these systems feed back into itself. All systems contain feedback loops since all dynamics of systems arise from interactions of feedback loops. Therefore, identifying the feedback loops is crucial in system dynamics methodology
Describe an application example of the system dynamics method.
system dynamics method was applied to model and understand the spread of COVID-19 in Tasmania, Australia. The objective was to analyze the complex interplay of factors like government policies, contact rates, and disease progression to predict infection trends and assess the impact of control measures. A dynamic modeling framework was proposed, utilizing stock and flow structures and feedback loops, to simulate population movement through different disease stages (susceptible, infected, recovered, death). This allowed for insights into infection dynamics and aimed to support policymakers in managing the pandemic.
See plot on slide 24
What could be possible problems for using the system dynamics approach?
Model Complexity and Data: Significant challenges arise from the complexity of building accurate models and the extensive data required for representation.
Validation and Calibration: Validating and calibrating the model against real-world data can be a difficult process.
Oversimplification: There’s a risk of oversimplifying or misrepresenting complex human behaviors and social dynamics within the model.
Expert Interpretation: Interpreting simulation results and deriving actionable insights often necessitates specialized expertise.
Implementation Challenges: Even with robust insights, implementing recommended policy changes can face organizational inertia or political resistance.
