Essay on Designing and Managing the Supply Chain
David Simchi-Levi Philip Kaminsky Edith Simchi-Levi
Solutions for Discussion Questions1
1We would like to thank Shiming Deng for his valuable contributions to the preparation of this manual.
Introduction to Supply Chain
Pick any car model manufactured by a domestic auto maker. For example, consider the
2002 Ford Thunderbird.
a. The supply chain for a car typically includes the following components:
1. Suppliers for raw materials
2. Suppliers for parts and subsystems
3. Automobile manufacturer (Ford, in this example). Within a company, there are also different departments, which constitute the internal supply chain: …show more content…
Effective supply chain management is also important for vertically integrated companies.
In such an organizational structure, various business functions are handled by different departments of the company that usually have different internal objectives, and these objectives are not necessarily aligned with each other. This may be due to lack of com- munication among departments or the incentives provided by the upper management. For instance, if the sales department is evaluated based on revenue only, and the manufacturing department is evaluated based on cost only, the company.s proÞt may not be maximized globally. Effective supply chain management is still necessary to achieve globally optimal operations. Question 6
The sources of uncertainty in this example include:
1. Factors such as weather conditions, diseases, natural disasters cause uncertainty in availability of raw materials, i.e., peach crop.
2. Uncertain lead times during transportation of crop from the Þeld to the processing facility may affect the quality of peaches, e.g., they may get spoiled.
3. Processing times in the plant, as well as the subsequent warehousing and transportation times are subject to uncertainty.
4. Demand is not known in advance.
A small number of centrally located warehouses allows a Þrm to take advantage of risk pooling in order to increase service