Module 6: Supply Chain Integration

Supply Chain Integration

The process of coordinating and aligning all parts of the supply chain to work together seamlessly.

Obstacles to Integration

Factors that hinder the alignment and coordination across various supply chain components

Lack of trust
Communication barriers
Incompatible technology
Resistance to change
Conflicting objectives

Lack of Trust

Building trust among partners is essential but challenging

Without trust, collaboration and information sharing are limited, which can lead to inefficiencies

Push System

Strategy where goods being produced in advance based on forecasted demand

Pros of Push System

High inventories, shorter lead times for consumers, and tolerable mistakes and defects.

Cons of Push System

High holding costs, low customization flexibility, waste due to mistakes, and costly forecasting miscalculations.

Pull System

Strategy where production and inventory are driven by actual customer demand

Pros of Pull System

Low inventories, minimized waste, flexible manufacturing, and closer supplier ties.

Cons of Pull System

Higher ordering costs, longer lead times, increased risk of stockouts, and potential sunk costs.

Pull System: Lean Manufacturing

Production method focused on minimizing waste and maximizing efficiency

Creates more value for the customer using fewer resources by continuously improving processes and reducing non-value-added activities

Postponement: Push and Pull

A strategy where certain stages of production or customization are delayed until customer demand is clearer.

Push the standardized portions of manufacturing
Delay the final assembly of the end item
Pull only the customized options offered to customers

Bullwhip Effect

An occurrence in supply chains where small fluctuations in demand at the consumer level cause larger fluctuations at the wholesale, distributor, manufacturer, and raw material supplier levels.

Bullwhip Effect: Causes and Effects

Price Fluctuations
Order Batching
Rationing
Shortage Gaming

Bullwhip Effect: Price Fluctuations

Often stems from various factors such as overreacting to demand signals, inflation, or promotions that encourage bulk buying

As these fluctuations move upstream, they create larger and larger swings in price, leading to unpredictability and inefficiencies in inventory management and forecasting for suppliers and manufacturers.

Bullwhip Effect: Order Batching

Companies intentionally place large orders to take advantage of economies of scale or to reduce ordering costs.

Can lead to suppliers overproducing in response to these large orders, creating excess inventory that can result in supply chain inefficiencies.

Bullwhip Effect: Rationing

Due to shortage, buyers only get partial orders from suppliers. And if demand is higher than available supply, might cause gaming

Bullwhip Effect: Shortage Gaming

When retailers anticipate that they will receive only partial orders from suppliers due to shortages, they may intentionally inflate their order sizes.

Typically used to counteract rationing

Trade Offs in Supply Chain Strategy

Considerations of cost, quality, speed, and flexibility that impact supply chain decisions.

Resistance to Change

Challenges faced during integration when employees or partners resist modifications in processes, roles, or technology.

Conflicting Objectives

Different priorities and goals among organizations in the supply chain that may lead to conflicts during integration.

Communication Barriers

Obstacles such as differences in technology, language, and culture that hinder effective integration through communication.

Incompatible Technology

Difficulties that arise when partners use different systems, obstructing smooth data flow and communication.