07 Supply Chain Management

Does Walmart use AI bots to negotiate with their suppliers?

Yes. Walmart uses AI to automate negotiations with “tail-end” suppliers, which account for 20% of its spend on low-value items. This streamlines procurement and reduces manual effort

Which BYD components are made in-house vs. outsourced? Why?

BYD vertically integrates key components like batteries and electric motors to control quality and reduce costs. Outsourcing is used for non-core parts to stay flexible and manage capacity

Does Arc’teryx manufacture some products in Canada? Why?

Yes. Arc’teryx manufactures ~10% of its products at ARC'One in Vancouver to support proprietary designs, rapid prototyping, and quality control for high-performance gear.

Can shipping by air end up being cheaper than by rail?

Surprisingly, yes. When total logistics costs (e.g., damage, inventory holding, speed) are considered, air freight can be more economical despite higher per-unit transport costs.

How can the average time that a product is in a Walmart distribution centre be less than 10 minutes?

Through cross-docking. Products are unloaded and immediately reloaded for outbound shipment, minimizing storage time and reducing handling and inventory costs.

How can slowing down improve supply chain performance?

Slowing down can reduce variability, improve coordination, and lower inventory costs. It supports better forecasting and smoother operations, especially in complex networks.

Why is the power supply for printers and laptops on the cord instead of inside the unit itself?

Externalizing the power supply simplifies product design, reduces heat inside the device, and allows for easier regional customization (e.g., voltage and plug types)

What is a Humanitarian Supply Chain? How many ‘disasters’ occur?

It mobilizes resources to aid communities affected by disasters. In 2024, hundreds of climate-related disasters occurred, with ~75% of IFRC responses targeting extreme weather events.

What is the Reverse Supply Chain?

It involves retrieving products from customers for reuse, recycling, or disposal. Key activities include remarketing, refurbishing, and end-of-life design considerations.

How many mugs can IKEA fit on a pallet?

IKEA optimizes product and packaging design to maximize pallet efficiency. While the exact number varies, their design-for-logistics approach significantly increases pallet density

supply chain

network of facilities that procure raw materials, transform them into intermediate goods and then final products, and deliver the products to customers through a distribution system. it spans procurement, internal transformation, and distribution.

supplier/facility location

going global to reduce labour costs

how do global companies use AI to prevent supply chain disruptions?

• finding alternative suppliers

• discovering what else current suppliers can do

• automating negotiations

reuters supplier location

states that reshoring helps control supply chain, so even if production costs were 20% lower in certain countries, the benefit was offset by longer lead times sparked by supply snags. therefore, when nearshoring they can react faster to trends and flexibly to bottlenecks

vertical integration

the proportion of the supply chain that the company owns

reasons to outsource

• financial - turning fixed costs into variable costs

• improvements - shorten the cycle time and improve risk management

• organizational - increasing flexibility to meet changing demand for products and services

why would an organization not want to outsource?

for control regarding strategic processes, intellectual property concerns, and “messy” coordination

arc’teryx vertical integration

the manufacturing facility is located in yvr, accounting for 10% of their global manufacturing, employing over 500 people in a 243,00 sqft facility

what can we takeaway from arc’one?

they order the finest manufacturing machines on earth to use down the road at their manufacturing facility, then they rip them apart and modify them. the focus is making products that will keep humans alive in the harshest conditions on earth, redefined to manufacture this type of gear in ways no other brand would dream of.

procurement

purchasing involves buying services or materials we elect to not develop internally. even modest reductions in these costs can lead to substantial payoffs!

vendor selection

based on many criteria, which have weighting to indicate importance. there are also ratings of each alternative supplier on each criteria

criteria examples

company, service, products, sustainability

company criteria

size/capacity, geographical locations, operational profit, and management

service criteria

deliveries on time, condition on arrival, handling of complaints, and technical assistance

products criteria

quality, price, packaging, and warranty

sustainability criteria

environmental and social criteria

vendor development

improving supplier operations and efficiency will improve the entire supply chain’s performance

types of purchasing

1. centralized purchasing

2. stockless purchasing

3. blanket purchase orders

4. pre-purchase capacity

centralized purchasing

submitting purchasing requests to central procurement office. there is purchasing power and control, but its slower and has reduced flexibility

stockless purchasing

the supplier delivers material directly to the production area rather than to a stockroom

blanket purchase orders (POs)

a long-term purchase commitment to a supplier for items that are to be delivered upon receipt of a shipping requisition

POs pros

• unit cost savings

• lower holding and ordering costs

• less supply uncertainty for retailer

• the manufacturer also has known demand which is efficient production planning

pre-purchase capacity

reserve capacity 18-24 months in advance by contracting for ‘garment units’. so procurement selects their actual mix of garment units a few months out

vendor managed inventory

vendors manage the customer’s inventory of the products they supply (ordering, stocking shelves, etc).

procurement - supplier consolidation

comparison of typical firms vs. those excelling at procurement supply chain management

physical distribution (logistics)

time utility, place utility, and form utility

time utility

provides goods to customers when wanted, not when produced. e.g storage, warehousing

place utility

provides goods where they are needed, not where they are produced. e.g transportation

form utility

physical/chemical change in goods and/or packaging. e.g assembly, manufacturing

what is important to consider in logistics costs?

all-inclusive costs, such as transportation, inventory, packing, and damage

why are intermodal shipments better?

they are the same container on boats, trains, and trucks. they are

• convenient

• extensive network

• optimal cost

• increased security

consolidating shipment strategy

having a distribution centre to strengthen shipments to retail locations

cross-docking

removing the intermediate step of storage by distributing them immediately after they are received

what does cross-docking reduce and require?

reduces: product handling, inventory, and facility costs

requires: tight-scheduling and extensive Information technology

drop shipping

retailer tells the supplier to ship it directly to you, if they do not have an item you want in stock. this saves both time and reshipping costs

logistics management strategies

postponement and postponement of place utility

postponement

intentionally “delay” supply chain activities, to improve flexibility and reduce inventory costs (of shortage or holding)

postponement of place utility

avoid committing to positioning inventory down the supply chain for as long as possible

labeling postponement

products are completed with the exception of labeling

packaging postponement

products are completed but stored in bulk without packaging. this reduces storage space and provides flexibility for demand fluctuations of different package sizes

third party logistics (3PL)

outsourcing allows each partner to concentrate on what they do best, and assign other aspects of their business process to another organization with expertise in that aspect

humanitarian supply chains

the processes and systems involved in mobilizing people, resources, skills, and knowledge to help vulnerable people affected by disaster

what is the most difficult link in the humanitarian supply chain?

distribution, as infrastructure if often damaged, and there is also poor coordination

humanitarian supply chains vs. commercial supply chains

1. cost not as critical as speed

2. high inventory levels

3. perishable items expire and are replaced

4. many stakeholders to coordinate with

5. high visibility of performance

6. job satisfaction

reverse supply chain

series of activities required to retrieve a product from a customer and either dispose or reuse it

product design & supply chain

1. design for manufacturability

2. shipping and handling considerations

3. eco-design strategy

4. modular design flexibility

5. design to “target cost”

6. compress the design process (concurrent engieneering)

7. formalize for production (BOM & routing)

design for manufacturability

• use standard materials and parts of known quality

• design to the process capability and set tolerances and specifications that won’t strain current system

• minimize number of distinct components

modular design flexibility

the creation of products (goods and services) from some combination of basic, pre-existing subsystems (or modules)

concurrent engineering

team approach to design, rather than a sequential, functional approach

home delivery & environment

nudging online shoppers to consider environmental impact

third party services

transportation, warehousing, distribution, order fulfillment, kitting and final assembly of modular products (mass customization), pick and pack, compliance labeling, product inspection and testing, product packaging, and reverse logistics

bill of materials

components required to finish product

routing

processing required to finish product