Supply Chain Management 4th edition

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Chapter 3 Supply Chain Drivers and Metri


  1. List and define the four major drivers of supply chain performance.

Answer: Facilities are the places in the supply chain network where product is stored, assembled, or fabricated. The two major types of facilities are production sites and storage sites.
Inventory is all raw materials, work in process, and finished goods within a supply chain. Inventory is an important supply chain driver because changing inventory policies can dramatically alter the supply chain’s efficiency and responsiveness.
Transportation entails moving inventory from point to point in the supply chain. Transportation can take the form of many combinations of modes and routes.
Information consists of data and analysis concerning facilities, inventory, transportation, and customers throughout the supply chain. Information is potentially the biggest driver of performance in the supply chain as it directly affects each of the other drivers.
Difficulty: Moderate

  1. Explain the supply chain decision-making framework and the role of the four major drivers.

Answer: The goal of a supply chain strategy is to strike the balance between responsiveness and efficiency, resulting in a strategic fit with the competitive strategy. To reach this goal, a company uses the four supply chain drivers discussed earlier. For each of the individual drivers, supply chain managers must make a trade-off between efficiency and responsiveness. The combined impact of these four drivers then determines the responsiveness and efficiency of the entire supply chain.
Most companies begin with a competitive strategy and then decide what their supply chain strategy ought to be. The supply chain strategy determines how the supply chain should perform with respect to efficiency and responsiveness. The supply chain must then use the supply chain drivers to reach the performance level the supply chain strategy dictates.
Difficulty: Moderate

  1. Explain the basic trade-off between responsiveness and efficiency for each of the major drivers of supply chain performance.

Answer: The fundamental trade-off when making facilities decisions is between the cost of the number, location, and type of facilities (efficiency) and the level of responsiveness that these facilities provide the company’s customers.
The fundamental trade-off when making inventory decisions is between responsiveness and efficiency. Increasing inventory will generally make the supply chain more responsive to the customer. This choice, however, comes at a cost as the added inventory decreases efficiency. Therefore, a supply chain manager can use inventory as one of the drivers for reaching the level of responsiveness and efficiency the competitive strategy targets.
The fundamental trade-off for transportation is between the cost of transporting a given product (efficiency) and the speed with which that product is transported (responsiveness). The transportation choice influences other drivers such as inventory and facilities. When supply chain managers think about making transportation decisions, they frame the decision in terms of this trade-off.
Good information systems can help a firm improve both its responsiveness and efficiency. The information driver is used to improve the performance of other drivers and the use of information is based on the strategic position the other drivers support. Accurate information can help a firm improve efficiency by decreasing inventory and transportation costs. Accurate information can improve responsiveness by helping a supply chain better match supply and demand.
Difficulty: Moderate

  1. Explain the role of each of the major drivers of supply chain performance.

Answer: Facilities are the where of the supply chain if we think of inventory as what is being passed along the supply chain and transportation as how it is passed along. They are the locations to or from which the inventory is transported. Within a facility, inventory is either processed or transformed into another state (manufacturing) or it is stored before being shipped to the next stage (warehousing).

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