Module9

Question 1

What is supply chain coordination?

Answer 1

• Supply chain coordination involves aligning plans and objectives of individual companies to improve overall supply chain performance.
• Each stage considers the impact of its actions on others.
• Contracts are often used as mechanisms to ensure coordination.

Question 2

What is the bullwhip effect?

Answer 2

• Bullwhip effect: Variability in orders increases as they move upstream in the supply chain.
• Common causes:
  
  • Demand forecasting based on orders, not end-user demand.
  • Order batching and periodic ordering.
  • Promotions and shortage gaming.
• Results in higher costs and inefficiencies.

Question 3

What are the negative effects of the bullwhip effect?

Answer 3

• Increased costs:
  
  • Manufacturing, inventory, transportation, and labor costs.
• Longer replenishment lead times.
• Decreased product availability.
• Worsened supply chain relationships.

Question 4

What is the order variance ratio (OVR)?

Answer 4

• OVR measures the bullwhip effect.
• Formula: ( OVR = \frac{\sigma^2{outgoing}}{\sigma^2{incoming}} )
• BWE occurs when upstream OVR exceeds downstream OVR.

Question 5

What are the five main obstacles to supply chain coordination?

Answer 5

1. Incentive obstacles: Misaligned incentives for different participants.
2. Information processing obstacles: Distorted or incomplete demand information.
3. Operational obstacles: Inefficiencies in operations, such as long lead times.
4. Pricing obstacles: Pricing strategies that increase order variability.
5. Behavioral obstacles: Lack of trust and poor communication.

Question 6

How can operational performance be improved in the supply chain?

Answer 6

• Use e-procurement and technology (e.g., RFID).
• Implement smaller lot sizes and combined shipments.
• Reduce replenishment lead times with digitalization and flexible manufacturing.

Question 7

What are the types of supply chain partnerships?

Answer 7

• Type I: Limited coordination; short-term focus.
• Type II: Moderate integration; long-term focus.
• Type III: High integration; partners act as extensions of each other.

Question 8

What are key ingredients for successful supplier partnerships?

Answer 8

• Shared vision and objectives.
• Building trust and personal relationships.
• Information sharing with secure communication.
• Commitment from top management.
• Managing changes effectively.

Question 9

What strategies stabilize order variability in supply chains?

Answer 9

• Use volume-based discounts over lot-size-based discounts.
• Implement everyday low pricing (EDLP) to avoid forward buying.
• Apply rationing schemes like “Turn-and-earn.”

Question 10

What is the continuum of supply chain relationships?

Answer 10

• Discrete relationships: Market-based, opportunistic, short-term.
• Relational partnerships: Cooperative, collaborative, long-term integration.