Global Supply Chain

Arkansas State University with Cullen Ray

Distribution

The steps taken to move and store a product from the suppliers to customers.

Supply Chain

A set of three or more organizations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer.

Implied Demand Uncertainty

Resulting uncertainty for the supply chain given the portion of demand the supply chain must handle and attributes the customer desires. Uncertainty of customer demand a supply chain must handle.

Safety Inventory

Inventory held in case demand exceeds expectations.

Responsive Supply Chain

A supply chain designed to handle wide ranges of demand, short lead times, high product variety, highly innovative products, and very high service levels.

Volume Flexibility

Ability to operate profitably at different levels of output.

Efficient Supply Chain

A supply chain designed to minimize the total cost of making and delivering products to customers.

Total Cost (Offshoring Decisions)

Includes supplier price, delivery costs, inventory and warehousing, cost of quality, tariffs and taxes, cost of risk, procurement staff and infrastructure, tooling and mold costs, and exchange rate trends. Firms fail when focusing only on unit cost instead of total cost.

Cycle Inventory

The average amount of inventory used to satisfy demand between shipments and is dependent on lot size decisions.

Procurement

The process by which a supplier sends products in response to customer orders.

The process by which a supplier sends products in response to customer orders.

An efficient supply chain focuses on minimizing total cost and works best when demand is stable and predictable. A responsive supply chain focuses on speed, flexibility, and customer service to meet uncertain demand. Responsiveness comes at a cost, while efficiency focuses on cost reduction. Strategic fit is achieved when the level of responsiveness matches the implied demand uncertainty faced by the supply chain.

Distribution Network Design Options:

Distribution networks involve two key decisions: whether products are delivered to customers or picked up, and whether products flow through an intermediary.

The six designs include:

manufacturer storage with direct shipping,

manufacturer storage with in-transit merge,

distributor storage with carrier delivery,

distributor storage with last-mile delivery,

manufacturer or distributor storage with customer pickup,

and retail storage with customer pickup.

Each option balances cost, response time, and customer service.

Six Drivers of Supply Chain Performance:

Facilities determine where products are produced and stored.

Inventory balances product availability with cost.

Transportation moves inventory through the supply chain.

Information connects and coordinates supply chain activities.

Sourcing determines who performs supply chain functions.

Pricing influences customer demand and supply chain behavior.

Each driver involves a tradeoff between efficiency and responsiveness.

Thinking Like a Supply Chain Manager:

Thinking like a supply chain manager means viewing the supply chain as an integrated system rather than isolated departments. Decisions must optimize the entire chain instead of local functions. The supply chain functions like a power grid where failures in one area affect the rest. Managers must align supply chain strategy with customer value, partner capabilities, and long-term competitive advantage.