Electronics Manufacturing – M528
Supply chain principles
Principles for supply chain
planning:
- The primary purpose of planning is to improve decision making.
- Planning is an integration process.
- Plan to control and minimize risk, not to completely eliminate risk.
- Do not plan if there is insufficient information, little variation or no decision making.
- More planning is not necessarily more beneficial.
- Planning is mostly re-planning.
- Planning is specific to each organization.
- There is no one best plan for all organizations.
- Planning is not a replacement for operations and strategies.
Principles for supply chain
performance:
- The output of a supply chain is less than its capacity.
- Variability in a supply chain may be buffered by some combination of inventory, capacity and time.
- ==> The supply chain of a product could be buffer by increasing inventory, adding more capacity or planning more time in the supply chain. Each of those options has a different potential impact on the environment.
- ==> For example, to handle the higher demand for a product during the holiday season, a company could increase the inventory in its warehouses (option 1) or it could add more production capacity (option 2) by contracting with more suppliers. Option 1 would require more energy and resources (likely a worse impact on the environment) regardless of whether all the inventory is sold or not during the holiday season. Option 2 would have less of an immediate impact on the environment because additional energy and resources would only be used for production when the extra inventory was required for sales.
- Flexibility reduces the amount of buffering required in a supply chain.
- Impact of flexible buffering is greater near bottlenecks in a supply chain.
- Combining sources of variability so that they can share a common buffer reduces the total amount of buffering required to achieve a specific level of supply chain performance.
- Stock pooling in a supply chain affects its performance.
- Stock with higher volume demand should be pooled closer to the end of the supply chain.
- Stock with higher variability demand should be pooled closer to the start of the supply chain.
- Stock with higher cost should be pooled closer to the start of the supply chain.
- Supply chain performance is reduced due to batch ordering, demand forecasting errors, promotional pricing and gaming behavior by customers.
- Commonly referred to as the bullwhip effect.
- Higher variability of risk between participants in a supply chain reduces its performance.
- ==> One measure of performance in a supply chain is wasted resources. If a supply chain has a few companies with very strong negotiating power (and less business risk) and many companies with little negotiating power (and more business risk), then the companies with more business risk are more likely to waste resources. Whereas a supply chain that has companies with less differences in business risk will be more likely to cooperate on reducing waste in the supply chain.
