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DesigningandManagingtheSupplyChainDavidSimchi-LeviPhilipKaminskyEdithSimchi-LeviSolutionsforDiscussionQuestions1KeremB¨ulb¨ul1WewouldliketothankShimingDengforhisvaluablecontributionstothepreparationofthismanual.Chapter1IntroductiontoSupplyChainManagementDiscussionQuestionsQuestion1Pickanycarmodelmanufacturedbyadomesticautomaker.Forexample,considerthe2002FordThunderbird.a.Thesupplychainforacartypicallyincludesthefollowingcomponents:1.Suppliersforrawmaterials2.Suppliersforpartsandsubsystems3.Automobilemanufacturer(Ford,inthisexample).Withinacompany,therearealsodifferentdepartments,whichconstitutetheinternalsupplychain:i.Purchasingandmaterialhandingii.Manufacturingiii.Marketing,etc.4.Transportationproviders5.Automobiledealersb.ManyÞrmsareinvolvedinthesupplychain.1.Rawmaterialsuppliers.Forinstance,suppliersforsteel,rubber,plastics,etc.2.Partssuppliers.Forinstance,suppliersforengines,steeringwheels,seats,andelec-troniccomponents,etc.3.Automobilemanufacturer.Forinstance,Ford.4.Transportationproviders.Forinstance,shippers,truckingcompanies,railroads,etc.5.Automobiledealers.Forexample,HaywardFord.c.AllcompaniesinvolvedinthesupplychainwanttomaximizetheirrespectiveproÞtsbyincreasingrevenueanddecreasingcost.However,companiesmayemploydifferent2strategiesinordertoachievethisgoal.Someofthemfocusoncustomersatisfactionandquickdelivery,whileothersmaybemoreconcernedaboutminimizinginventoryholdingcosts.d.Ingeneral,differentpartsofthesupplychainhaveobjectivesthatarenotalignedwitheachother.1.Purchasing:Stableorderquantities,ßexibledeliveryleadtimesandlittlevariationinmix.2.Manufacturing:Longproductionruns,highquality,highproductivityandlowpro-ductioncosts.3.Warehousing:Lowinventory,reducedtransportationcostsandquickreplenishmentcapability.4.Customers:Shortorderleadtimes,alargevarietyofproductsandlowprices.Typically,theautomobiledealerwouldliketoofferavarietyofcarcolorsandconÞg-urationstoaccommodatedifferentcustomerpreferences,andmeanwhilehaveashortdeliveryleadtimefromthemanufacturer.However,inordertomaximizethelengthofproductionruns,andutilizeresourcesmoreefficiently,themanufacturerwouldliketoaggregateordersfromdifferentdealersandofferlessvarietyincarconÞgurations.Thisisaclearexampleofconßictingmarketingandmanufacturinggoals.Question2a.Thesupplychainforaconsumermortgageofferedbyabankmayinvolvevariouscom-ponents:1.Marketingcompaniesthathandlesolicitationtopotentialcustomers.2.Creditreportingagenciesthatevaluatepotentialcustomers.3.Thebankthatextendsthemortgageloans.4.Mortgagebrokersthroughwhichtheloansaredistributed.b.Themarketingcompaniesstrivetoincreasetheresponseratefromhomebuyersinordertomaximizetheirreturns.Banksaimatacustomerportfoliowitharelativelylowrisk,healthyßowofpaymentsandlowaverageloanmaturitydate.Thebrokerswouldliketomaximizetheirsalescommissions.c.Similartoproductsupplychains,theobjectiveofaservicesupplychainistoprovidewhatisneeded(inthiscaseaparticulartypeofservice,ratherthanaphysicalproduct)attherightlocation,attherighttime,andinaformthatconformstocustomerrequire-mentswhileminimizingsystemwidecosts.However,thereareanumberofdifferencesbetweenthetwotypesofsupplychains.Forinstance:1.Inaproductsupplychain,thereisbothaßowofinformationandphysicalproducts.Inaservicesupplychain,itisprimarilyinformation.2.Contrarytoaservicesupplychain,transportationandinventoryaremajorcostcomponentsinaproductsupplychain.33.Servicestypicallycannotbeheldininventory,somatchingcapacitywithdemandisfrequentlymoreimportantinaservicesupplychain.4.Inaservicesupplychain,the(explicit)costofinformationishigherthaninaproductsupplychain.Notethatinthemortgageexampleabove,thebankhastocompensatethecreditreportingagencyforeachcreditreportitobtains.Question3Manysupplychainsevolveovertime.Forexample,consideramemorychipsupplychain.Productionstrategiesmaychangeduringdifferentstagesoftheproductlifecycle.Whenanewmemorychipisintroduced,priceishigh,yieldislow,andproductioncapacityistight,andtheavailabilityoftheproductisimportant.Consequently,productionisusuallydoneatplantsclosetomarkets,andthemanagementfocusesonincreasingyield,reducingthenumberofproductiondisruptions,andfullyutilizingcapacity.Whentheproductmatures,however,itspricedropsanddemandisstabilizedforaperiodoftime,sominimizingproductioncostmovestocenterstage.Toreducecosts,productionmaybeoutsourcedtooverseasfoundries,wherelaborandmaterialsaremuchcheaper.Question4Averticallyintegratedcompanyaimsattighterinteractionamongvariousbusinesscom-ponents,andfrequentlymanagesthemcentrally.Suchastructurehelpstoachievesys-temwidegoalsmoreeasilybyremovingconßictsamongdifferentpartsofthesupplychainthroughcentraldecisionmaking.Inahorizontallyintegratedcompany,thereisfrequentlynobeneÞtincoordinatingthesupplychainsofeachbusinesswithinthecompany.Indeed,ifeverybusinessspecializesinitscorefunction,andoperatesoptimally,anoverallglobaloptimummaybeapproached.Question5Effectivesupplychainmanagementisalsoimportantforverticallyintegratedcompanies.Insuchanorganizationalstructure,variousbusinessfunctionsarehandledbydifferentdepartmentsofthecompanyt