Supply Chain Management Simulation Debrief

Question 1

What is a Purchase Order?

Answer 1

This is the “paperwork” where the buyer documents and requests the quantity needed from the seller.

Question 2

Which way do purchase orders flow?

Answer 2

Upstream

Question 3

Which way do products flow?

Answer 3

Downstream

Question 4

Can customer demand be blamed for problems?

Answer 4

No

Question 5

What happens when there is a lack of communication / cooperation in SCM?

Answer 5

Guessing consumer demand, which leads to arbitrary ordering decisions. Here, the result is the bullwhip effect.

Question 6

What is the bullwhip effect?

Answer 6

When information (orders) going back through the supply chain is distorted and then amplified.

Question 7

How does a long lead time affect decision making?

Answer 7

Panic: when inventory does not instantly arrive and solve your growing backlog, you panic and order even more.

Question 8

What are the business implications of the supply chain structure?

Answer 8

Stockouts at times
Excess inventory at times
Overtime costs
Layoffs / Re-hiring costs
Expediting

Question 9

How does the supply chain structure lead to higher end prices for the consumer?

Answer 9

The supply chain structure leads to high costs throughout the supply chain, leading to a higher end price for the consumer.

Question 10

How is the bullwhip effect measured?

Answer 10

It is measured through variance amplification, which is present if the bullwhip measure is greater than 1.

Question 11

What is the formula to measure the bullwhip effect?

Answer 11

Bullwhip = Variance of Orders / Variance of Demand

Question 12

How can we improve the supply chain through Communication & Cooperation?

Answer 12

Actual consumer demand = information technologies
Incentives to share information (lower unit cost for actual data)
Vendor Managed Inventory
Forecasting = Collaborative planning forecasting and replenishment (CPFR)

Question 13

How can we improve lead time in SCM?

Answer 13

Administration (Ordering) Lead Time = Information Technology
Physical manufacturing Lead Time = Just-In-Time production systems, Small batches
Transportation Lead Time = Have suppliers geographically close by

Question 14

What is on-shoring?

Answer 14

Domestic outsourcing where production takes place in your own country.

Question 15

What is next-shoring?

Answer 15

Moving local production near demand (‘next to’).

Question 16

What are the benefits of next-shoring?

Answer 16

Reduces logistics costs
Improves environmental performance
Reduces length of lead times
Reduces variability of lead times
Easier to identify local needs
Consumer perception: “jobs in home country”

Question 17

What if you cannot change the supply chain structure?

Answer 17

The Aspirin Rule - You are inherently aware of the “lead time”, and don’t panic.

Question 18

How can we avoid the supply chain problems present in the Beer Game Simulation?

Answer 18

Change the supply chain structure (if possible)
If you cannot change the supply chain structure: Adapt
Choose “capable” suppliers (don’t focus on cost)

Question 19

What are the key learnings from the Beer Game Simulation?

Answer 19

Smooth your supply chain
‘Everyday low prices’ is ideal approach for SCM

Question 20

What are the characteristics seen in the Beer Game Graphs?

Answer 20

Fluctuation
Amplification
Time Lag