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Module SCM102: Supply Chain Strategies I: Aligning Strategies; Efficiency and Cost Savings
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1 - 2 hours | Approx.
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Counts toward Fundamentals of Supply Chain Management |
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Excerpt 1: Beer Game Simulation
...Each week, the values in the "Current Status" area will update9. Your "Initial Inventory" box will show a positive number if you have beer in stock, and a negative number if you are in a stockout situation and have a backlog of unfilled customer orders. If a partial shipment is possible, that will happen, and a partial backorder will be recorded. If you are totally out of stock, the entire customer order will be backordered. Beer Game rules typically state that the weekly cost of a backorder is twice as high as the cost of holding inventory. You should keep this in mind when making ordering decisions; remember, the goal of the simulation is to maintain low "Current Inventory" without stocking out.
(Simulation does not work in preview)
Go ahead and play some rounds (the simulation ends at 30 weeks); make sure to do them quickly, taking no more than 30 seconds to decide on your quantity to order from the Factory. After you have played up to at least week 17, press the "Make Chart" button to view your results. Be sure to press the "Make Chart" button when you are finished - pressing the "next" navigation buttons on the module toolbars will not pass your results on to the next screen.
Copyright © 2001 Supply Chain Online
Excerpt 2: Allocation Gaming
...When production materials or components are threatened to be in short supply, suppliers typically place them "on allocation", which means that suppliers distribute their limited inventory across all their downstream customers to make sure each one gets at least some of their order. Even if you ordered 10,000 monitors for January delivery, you may get only 5,000 due to shortages in availability. Allocation allows suppliers to meet some of the orders from all purchasers, so that no one is left with zero product. The idea is that giving everyone a portion of requirements is somehow better, in the long run, than giving some customers 100% of their orders and other customers nothing.
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Invariably, some people will over-order to compensate, particularly if the shortage becomes widely apparent. There are many examples of this behavior, particularly for industrial products and components...
Excerpt 3: Direct Sales
...Still another way to avoid information distortion is to sell directly to consumers. Most existing supply chains aren’t organized this way, although the Dell DirectSM model is an example of direct sales. In a direct sales system, there are no intermediate stages between the consumer and the manufacturer, so no distortion exists.
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For all its benefits, there is a tremendous cost to existing supply chains in moving toward a direct sales model. If a manufacturer starts selling "direct", his partners in the existing supply chain can desert him or cause other difficulties such as favoring products of competing manufacturers. This is called "Channel Conflict" and is a very serious potential problem for firms considering selling direct as a new channel on top of existing indirect channels...
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