Evaluation Of Supply Chain Design And Management

Submitted By stpk2013
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Pages: 9
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The supply chain design and management is the backbone of a company and some of the most important decisions a startup company can make. Integrating the acquisition of supplies, producing goods, and delivering the final product to the customer are what building a supply chain is all about (Heizer, 2010). The effectiveness of a companies supply chain is essentially the effectiveness of the company. For this company the best supply chain strategy to follow would be the Keiretsu network. This option provides a combination of few suppliers and vertical integration. The Keiretsu has more suppliers and less risk than a few suppliers strategy while also having the advantage of the Just-in-time inventory approach. This strategy is more financially sound for a smaller, startup business because the manufacturer and the supplier can shoulder the risk while at the same time collaborating and sharing ideas and technical expertise for the good of the conglomerate. It would be wise to partner with a lifelong supplier to avoid both the market competition and the constant struggle to obtain financial support from an outside vendor. The bigger the Keiretsu, the more parties who have an interest in helping each other succeed (Heizer, 2010).

As a business evaluation for the performance of the implemented supply chain, there must be metrics for which to measure quantified figures to determine if it is effective or not. There are five basic metrics that can be used to determine performance, beginning with lead time or the time from the placement of the order to the delivery of the product. Obviously the shorter the lead time the more efficient the supply chain. The next would be time spent placing an order. Once again, it will be very clear if there is some issue with how one aspect of the supply chain is working if the time exceeds the benchmark by too great a span. Third is the percentage of late deliveries. Late deliveries means some disconnect within the supply chain that caused the delay. Percent of rejected materials is next and is particularly useful in determining the quality of goods by how many defective units are found. Lastly is the number of shortages per year. This metric specifically reflects the how efficient the supply chain is at determining production numbers for a year based on demand (Heizer, 2010).

Whenever there are poor results in a supply chain, there are usually common issues that are at the source of them. Incentives, such as discounts, sales incentives, and promotions, force products through the chain even when they have not taken place yet (Heizer, 2010). These variances end up costing the entire chain due to the lack or regularity with costs that were the original basis for systems metrics. Local optimization is also an issue that could complicate the supply chains performance. This occurs when overcompensation due to a spike, either up or down, in demand is applied. The members desire to maximize local profit and having an excess of product or a shortage of product is a loss in that revenue. A third source of complication is in large lots. Large lots are known to lower shipping and production costs however they skew the figures because they do not accurately show actual sales and the increased holding costs that are associated with holding large lots. In order for the supply chain to run efficiently, the information in each stage that is being recorded must be accurate (Heizer, 2010).

Two methods that would be particularly helpful in managing an integrated supply chain would be having accurate pull data and reducing lot size. Pull data is the sales data that is used to begin the production process through the supply chain. By having accurate pull data along with point of sales information and computer assisted ordering, a company is able to take the customers order, cross reference it with market factors, inventory, and other orders to have one combined order sent to
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