Vertical Integration Case Study

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Register to read the introduction… Vertical integration offers the power tool company to control the end product as well as its component parts.

B. Discuss metrics that could be used to measure performance of the supply chain.
Supply Chain Performance refers to the extended supply chain’s activities in meeting end-customer requirements, including product availability, on-time delivery, and all the necessary inventory and capacity in the supply chain to deliver that performance in a responsive manner. (Warren H. Hausman)

Supply chain measurements or metrics such as Backorder Reporting, Cycle Time, Defects per Million Opportunities (DPMO), Fill Rate and various other metrics are used to track Supply Chain performance. These metrics can helps a company to understand how your company is operating over a given period of time. Supply chain measurements can cover areas including Procurement, Production, Distribution, warehousing, Inventory, Transportation and Customer Service. (John Taras)

i. Backorder Reporting: An unfilled customer order. A backorder is demand (immediate or past due) against an item whose current stock level is insufficient to satisfy demand. This calculation can vary. Some companies count items that are not confirmed (not allocated) and past the Requested Delivery Date (or Requested Ship Date). Other companies may also count those items with stock confirmed, but past
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Trigger events include the frequency of orders, varying quantities ordered, or the combination of both events by downstream partners in a supply chain. As the orders make their way upstream, the perceived demand is amplified and produces what is known as the bullwhip effect. (Scott Frahm)
Some causes of the bullwhip effect include:
i. Consumer demand swings ii. Natural disasters that disrupt the flow of goods and services iii. Overcompensation when addressing inventory issues iv. Ordering process, such as order batching, can also contribute to bullwhip effect
v. Customers can also contribute to the bullwhip effect by engaging in shortage gaming during periods of short supply by purchasing more than they need. (University of San Francisco)

To reduce the Bullwhip Effect:
1. Improve the flow of information along the supply chain. Improving communication and forecasting end-user needs greatly assist in reducing the bullwhip effect. In addition, look to day-today operations along the supply chain to observe trends and better predict customer demands. (Owen

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