Showing papers on "Supply chain published in 1997"
TL;DR: The authors analyzes four sources of the bullwhip effect: demand signal processing, rationing game, order batching, and price variations, and shows that the distortion tends to increase as one moves upstream.
Abstract: (This article originally appeared in Management Science, April 1997, Volume 43, Number 4, pp. 546-558, published by The Institute of Management Sciences.)
Consider a series of companies in a supply chain, each of whom orders from its immediate upstream member. In this setting, inbound orders from a downstream member serve as a valuable informational input to upstream production and inventory decisions. This paper claims that the information transferred in the form of "orders" tends to be distorted and can misguide upstream members in their inventory and production decisions. In particular, the variance of orders may be larger than that of sales, and distortion tends to increase as one moves upstream-a phenomenon termed "bullwhip effect." This paper analyzes four sources of the bullwhip effect: demand signal processing, rationing game, order batching, and price variations. Actions that can be taken to mitigate the detrimental impact of this distortion are also discussed.
4,124 citations
TL;DR: In this paper, a conceptual model that provides guidance for future supply chain decision-making and research is proposed, based on a review of the literature and management practice, it is clear that there is a need for some level of coordination of activities and processes within and between organizations in the supply chain that extends beyond logistics.
Abstract: Practitioners and educators have variously addressed the concept of supply chain management (SCM) as an extension of logistics, the same as logistics, or as an all‐encompassing approach to business integration. Based on a review of the literature and management practice, it is clear that there is a need for some level of coordination of activities and processes within and between organizations in the supply chain that extends beyond logistics. We believe that this is what should be called SCM. This article proposes a conceptual model that provides guidance for future supply chain decision‐making and research.
2,789 citations
Journal Article•
2,665 citations
Journal Article•
TL;DR: In this article, the authors identify four major causes of the bullwhip effect: demand forecast updating, rationing, price fluctuation, and shortage games, and they suggest several ways in which companies can counteract the effect.
Abstract: Tremendous variability in orders along the supply chain can plague companies trying to eliminate excess inventory, forecast product demand, and simply make their supply chain more efficient. What causes the bullwhip effect that distorts information as it is transmitted up the chain? The authors identify four major causes:
1. Demand forecast updating. As each entity along the chain places an order, it replenishes stock and includes some safety stock. With long lead times, there may be weeks of safety stocks, which make the fluctuation in demand more significant.
2. Order batching. Companies may place orders in batches, often to avoid the cost of processing orders more frequently or the high transportation costs for less-than-truckload orders. Suppliers, in turn, face erratic streams of orders, and the bullwhip effect occurs. When order cycles overlap, the effect is even more pronounced.
3. Price fluctuation. Special promotions and price discounts result in customers buying in large quantities and stocking up. When prices return to normal, customers stop buying. As a result, their buying pattern does not reflect their consumption pattern.
4. Rationing and shortage gaming. If product demand exceeds supply, a manufacturer may ration its products. Customers, in turn, may exaggerate their orders to counteract the rationing. Eventually, orders will disappear and cancellations pour in, making it impossible for the manufacturer to determine the real demand for its product.
The authors suggest several ways in which companies can counteract the bullwhip effect:
1. Avoid multiple demand forecast updates. Companies can make demand data from downstream available upstream. Or they can bypass the downstream site by selling directly to the consumer. Also, they can improve operational efficiency to reduce highly variable demand and long resupply lead times.
2. Break order batches. Companies can use electronic data interchange to reduce the cost of placing orders and place orders more frequently. And they can ship assortments of products in a truckload to counter high transportation costs or use third-party logistics companies to handle shipping.
3. Stabilize prices. Manufacturers can reduce the frequency and level of wholesale price discounting to prevent customers from stockpiling. They can also use activity-based costing systems so they can recognize when companies are buying in bulk.
4. Eliminate gaming in shortage situations. In shortages, suppliers can allocate product based on past sales records, rather than on orders, so customers don't exaggerate their orders. They can also eliminate their generous return policies, so retailers are less likely to cancel orders.
Only by thoroughly understanding the underlying causes of the bullwhip effect, say the authors, can companies counteract and control it.
1,565 citations
TL;DR: In this article, the authors explore the management practices and the environmental factors that relate most closely to successful integration of suppliers into the new product development (NPD) process and identify supplier membership on the NPD project team as the greatest differentiator between most and least successful integration efforts.
928 citations
TL;DR: In this paper, a conceptual model is provided which helps to identify certain assumptions made in the literature that must be challenged and a research agenda for the future of supply chain management is developed.
Abstract: In order to respond to competitive pressures, managers need to know more about the strategic aspects of supply chain management. This paper addresses this need by critically reviewing the supply chain management literature and by suggesting a research agenda for the future. A conceptual model is provided which helps to identify certain assumptions made in the literature that must be challenged. The model also provides a tool for identifying the major contributions in the literature. Finally, a research agenda is developed.
632 citations
TL;DR: In this article, the authors identify the magnitude of the problem by establishing an empirical lower bound on the profitability impact of the bullwhip effect and show that eliminating the effect can increase product profitability by 10 to 30%.
604 citations
TL;DR: In this paper, a series of companies in a supply chain are modeled as a set of supply chains, and the authors consider the problem of finding the optimal supply chain for each of them.
Abstract: (This article originally appeared in Management Science, April 1997, Volume 43, Number 4, pp. 546-558, published by The Institute of Management Sciences.) Consider a series of companies in a supply...
489 citations
TL;DR: A review of supply chain research from both the qualitative conceptual and analytical operations research perspectives is provided in this article, where the authors provide a review of the current conceptual based supply chain literature.
425 citations
TL;DR: Honda of America has developed a comprehensive approach to teaching the principles of lean production to its suppliers in which Honda and the supplier work intensively on narrowly targeted improvement projects in the supplier's plant as mentioned in this paper.
Abstract: Honda of America has developed a comprehensive approach to teaching the principles of lean production to its suppliers in which Honda and the supplier work intensively on narrowly targeted improvement projects in the supplier's plant. Called BP (for "Best Process," "Best Performance" "Best Practice"), this approach has been quite successful in enhancing supplier performance; suppliers participating in the program in 1994 averaged productivity gains of 50% on lines reengineered by BP. However, Honda has found there is high variation in the extent to which suppliers were able to transfer the lessons taught beyond the line or plant where the BP intervention occurred. Drawing on case studies of three of Honda's U.S. suppliers, this article explores how the BP process interacts with the broader relationship between customer and supplier in terms of organizational learning, technology transfer, and the transplantation of Japanese management practices to the United States. These cases illustrate the dynamics of the learning process and the complex relationship that emerges between the "teacher" (provider) of valuable knowledge and the "student" (recipient).
376 citations
TL;DR: In this paper, the authors present the beneficial dynamic effects of enriching each supply chain member's order decision with undistorted market sales, and conclude that tremendous benefits can result from adopting a holistic approach if the attitudinal problems associated with information sharing can be overcome.
Abstract: Speed of response to customer demand has long been recognized as a key attribute to business success since customer loyalty can be won or lost on product availability. With everyone implementing lean manufacturing philosophies, companies additionally need to become smart chain managers and ensure continuous improvement to stay competitive. Exploits further the concept of the “seamless supply chain”, by encouraging market place information to move through the supply chain with as little distortion as possible. The simulation model used to benchmark performance improvement is representative of both the MIT beer game and much experimental industrial practice. It is therefore realistic as an aid to the implementation of decision support systems (DSS). Presents the beneficial dynamic effects of enriching each supply chain member’s order decision with undistorted market sales. Concludes that tremendous benefits can result from adopting a holistic approach if the attitudinal problems associated with information sharing can be overcome.
TL;DR: In this paper, the authors review the techniques available to "predators" seeking to gain competitive advantage for their supply chains, including industrial engineering, operations engineering, production engineering, and information technology.
Abstract: It is no longer sufficient for a winning organisation to operate in isolation, however effective it may be in performing its core business. To survive, let alone win, it must be part of one or more supply chains producing world class performance. Each company in the chain must be internally "lean" but additionally must operate in a "seamless" environment in which all information relevant to the efficient operation of the total system is available on time and in an undistorted form. The term "predator" has been coined in the literature to describe the supply chain leader with the vision, drive, and determination to re-engineer the entire supply chain so as to satisfy end-customer needs. The paper reviews the techniques available to "predators" seeking to gain competitive advantage for their supply chains, including industrial engineering, operations engineering, production engineering, and information technology. Not all conceivable improvements can be implemented overnight, however desirable they might appear, hence the advocacy of simulation models within a decision support system so that top management can prioritise proposed Improvement Programmes against the relevant performance metric. In the example used to indicate the approach, the technological, organisational, and attitudinal problems to be solved by top management in achieving the seamless supply chain are all highlighted.
Patent•
20 Aug 1997
TL;DR: In this paper, a system for extended enterprise planning across a supply chain is provided, which includes transactional execution system layers (14, 18) for a demand enterprise (10) and a supply enterprise (12).
Abstract: A system for extended enterprise planning across a supply chain is provided. The system includes transactional execution system layers (14, 18) for a demand enterprise (10) and a supply enterprise (12). First and second federated electronic planning interchange layers (16, 20) provide a data specification format and an external communication interface for transactional execution system layers (14, 18). A supply chain planning engine (22), operable to perform planning for the supply chain, is in communication with a third federated electronic planning interchange layer (24) which provides a data specification format and an external communication interface for the supply chain planning engine (22). A data access/transfer layer (28) interconnects and allows transfer of information between the first, second and third electronic federated planning interchange layers (16, 20, 24). The supply chain planning engine (22), the first transactional execution system (14) and the second transactional execution system (18) can thereby communicate data which the supply chain planning engine (22) can use to provide constraint based extended enterprise planning across the supply chain.
01 Jan 1997
TL;DR: An expanded scope for supply chain management research is advocated in this paper, which accounts for the social function and the political and economic implications of supply chain developments, arguing that the research agenda must not be driven by the notion of efficiency alone, but should also be developed around the concept of the just supply chain.
Abstract: An expanded scope for supply chain management research is advocated, which accounts for the social function and the political and economic implications of supply chain developments. It is argued that the research agenda must not be driven by the notion of efficiency alone, but should also be developed around the concept of the just supply chain.
TL;DR: In this article, the authors advocate an expanded scope for supply chain management research which accounts for the social function and the political and economic implications of supply chain developments, arguing that the research agenda must not be driven by the notion of efficiency alone, but should also be developed around the concept of the just supply chain.
Abstract: Advocates an expanded scope for supply chain management research which accounts for the social function and the political and economic implications of supply chain developments. Argues that the research agenda must not be driven by the notion of efficiency alone, but should also be developed around the concept of the just supply chain. Provides a framework which sets out the range of issues which may contribute to this approach. Believes that the objectives and ideological assumptions of research need to be open to challenge and debate.
TL;DR: In this article, the authors developed simple inventory management rules to operate continuous replenishment (CR) and tested these rules with a simulation using actual demand data provided by Campbell Soup, and found that retailer inventories were reduced on average by 66% while maintaining or increasing average fill rates.
Abstract: Campbell Soup's continuous replenishment (CR) program is a novel innovation designed to improve the efficiency of inventory management throughout the supply chain. With CR (1) retailers pay a constant wholesale price but continue to participate in consumer promotions, (2) retailers transmit to the supplier daily inventory information via electronic data interchange (EDI), and (3) the supplier assumes responsibility for managing retailer inventories, i.e., vendor managed inventories (VMI). We develop simple inventory management rules to operate CR, and we test these rules with a simulation using actual demand data provided by Campbell Soup. On this sample we find that retailer inventories were reduced on average by 66% while maintaining or increasing average fill rates. This improvementreduces a retailer's cost of goods sold by 1.2%, which is significant in the low profitmargin grocery industry. Furthermore, these savings could have been achieved without VMI.
Journal Article•
TL;DR: Evidence is provided to support the claims of process reengineering that are common in the popular business press, but for which statistically significant empirical evidence is minimal.
Abstract: This paper discusses the relationship between business process reengineering and channel performance for firms implementing electronic data interchange (EDI) linkages within the U.S. grocery industry. Both quantitative and qualitative data sources are combined to test the hypothesis that channel transformation involving adoption of EDI and redesign of replenishment processes enables performance improvements more than an order of magnitude greater than implementation of EDI alone. This new process, enabled by EDI, provides retailers with 50- 100% higher inventory turns for products on continuous replenishment processes (CRP) relative to retailer performance using traditional ordering processes. Firms adopting EDI without using CRP to reengineer the ordering processes have failed to realize any statistically significant improvements in either inventory levels or warehouse stockouts. This research provides evidence to support the claims of process reengineering that are common in the popular business press, but for which statistically significant empirical evidence is minimal. The findings of the research also demonstrate the potential improvements that firms can realize through extending the business process reengineering concept to include the firms' entire supply chain.
TL;DR: In this paper, the authors enumerate a number of these levers and present a model whereby they might be combined into effective response capability, which is illustrated by data obtained from a skiwear manufacturer that did so.
Abstract: Reducing lead time enables a company to react more quickly to demand information and, hence, to better match supply with uncertain demand. But it is only one lever for improving response capability. Managers are familiar with others (e.g., excess capacity, supplier choice, and so forth) but lack techniques to quantify the impact of adjusting these levers. Here, we enumerate a number of these levers and present a model whereby they might be combined into effective response capability. The impact of adjusting these levers is illustrated by data obtained from a skiwear manufacturer that did so. Some of the insights that resulted run counter to intuition.
Book•
29 Dec 1997
TL;DR: The Theory of Constraints (TOC) as discussed by the authors is a systematic method for getting improvement across an organization by inspecting what you expect and measuring the goal and the goal.
Abstract: An Opening Word Overview of the Theory of Constraints-A Systematic Method for Getting Improvement Across an Organization Inspect What You Expect-The Goal and Measurement Two Paradigms-Moving from the Cost World to the Throughput World Overview of the Theory of Constraints-An Example The Assumptions Behind the Theory of Constraints Three Diseases Attacking Every Organization Other Improvement Techniques and the Theory of Constraints Why the Total Quality Approach Fails Integrating a Total Quality and Theory of Constraints Approach The Theory of Constraints and Other Management Techniques Applying the Theory of Constraints to Securing the Future Applying the Theory of Constraints to Finding Financial Security Applying TOC to Building Customer Satisfaction and Value Generic Steps to Customer Satisfaction Some Common Customer Satisfaction Problems and Solutions Improving the Supply Chain Improving the Supply Chain-Example Applying TOC to Employee Security and Satisfaction Establishing an Employee Baseline Measurements Marketing Seven Projects That Must Report to the CEO Case Studies Introduction Case Study 1: Scarborough Public Utilities Commission Case Study 2: The Orman Grubb Company Case Study 3: ABC Forge Case Study 4: Strengthening Marketing Pillars at a Health Services Company Case Study 5: Applying TOC to Thousands of Employees at Alcan Case Study 6: A High Tech Company-The Operation Was a Success But the Patient Died Case Study 7: Acme Manufacturing Corporation Glossary Index
TL;DR: In this paper, the relationship between business process reengineering and channel performance for firms implementing electronic data interchange (EDI) linkages within the U.S. grocery industry is discussed.
Abstract: This paper discusses the relationship between business process reengineering and channel performance for firms implementing electronic data interchange (EDI) linkages within the U.S. grocery industry. Both quantitative and qualitative data sources are combined to test the hypothesis that channel transformation involving adoption of EDI and redesign of replenishment processes enables performance improvements more than an order of magnitude greater than implementation of EDI alone. This new process, enabled by EDI, provides retailers with 50- 100% higher inventory turns for products on continuous replenishment processes (CRP) relative to retailer performance using traditional ordering processes. Firms adopting EDI without using CRP to reengineer the ordering processes have failed to realize any statistically significant improvements in either inventory levels or warehouse stockouts. This research provides evidence to support the claims of process reengineering that are common in the popular business press, but for which statistically significant empirical evidence is minimal. The findings of the research also demonstrate the potential improvements that firms can realize through extending the business process reengineering concept to include the firms' entire supply chain.
Journal Article•
TL;DR: In a study of lean production in a global computer company, Levy found that the necessary flow of goods and information was costly and difficult to achieve as discussed by the authors, and that managers frequently underestimated the associated costs because they did not plan for a complex, dynamic supply chain.
Abstract: In a study of lean production in a global computer company, Levy determined that the necessary flow of goods and information was costly and difficult to achieve. Managers frequently underestimated the associated costs because they did not plan for a complex, dynamic supply chain. However, some aspects of lean production such as reduction of defects and engineering change orders may facilitate globalization.
In the case of CCT, a PC company, Levy compared various aspects of domestic and international sourcing. Distance was often responsible for severe delays, and the company frequently used air rather than sea freight to expedite deliveries. The expense wiped out the location's cost advantages. Managers often did not plan for the extra inventory needed to cope with fluctuating demand when the source of supply was one month away. Distance affected the accuracy of sales forecasts and impaired communications. Design-for-manufacture issues, which relied on face-to-face communication, also suffered. And production problems, which normally took a day or two to resolve with local suppliers, took almost a week with foreign suppliers. Quality control was also hampered.
Levy warns companies to plan for the additional costs of operating an international supply chain. He suggests locating value chain activities close to each other, for example, in Mexico and the United States. Managers need to anticipatefrequent disruptions and see the chain as a dynamic system, with some links more critical than others.
TL;DR: In this paper, the authors demonstrate that TQM practices are related to performance by combining nonlinear (DEA) and linear (regression) analyses, and establish this relationshp using objective (not self-reported) quality performance data.
Abstract: Recent empirical studies of quality management have led to mixed findings regarding a significant positive relationship with performance. By combining nonlinear (DEA) and linear (regression) analyses, we demonstrate that TQM practices are related to performance. We establish this relationshp using objective (not self-reported) quality performance data. We believe that this is the first study to use objective quality data collected by a third party. Our findings should encourage manufacturers to continue promoting TQM practices throughout the supply chain; certain practices do lead to better performance.
TL;DR: In this paper, the authors present a review of the models for the management of global supply chains and some evidence concerning current practice, and conclude with a summary of directions for future research.
Abstract: In this paper, we present a review of the models for the management of global supply chains and some evidence concerning current practice. Our review is restricted to the literature on intrafirm global supply chains and is motivated by empirical data concerning the extent of intrafirm globalization. The review of the literature suggests that research has not evolved in a coherent manner, while the data suggest that the extent of globalization is also hard to gauge. Indeed, the journey toward supply chain globalization is far from over. Significant gaps exist between theory and the practice. We conclude with a summary of directions for future research.
TL;DR: In this article, the concept of time-based competitive strategies within the context of supply chain management is proposed. And the authors explore the current interest in supplier integration as a source of competitive advantage in consumer markets and propose that the Japanese influenced network sourcing model provides a method whereby the advantages of vertical integration can be achieved without reducing the flexibility of product and material outsourcing.
Abstract: Develops the concept of time‐based competitive strategies within the context of supply‐chain management. Explores the current interest in supplier integration as a source of competitive advantage in consumer markets and proposes that the Japanese influenced network sourcing model provides a method whereby the advantages of vertical integration can be achieved without reducing the flexibility of product and material outsourcing. A central feature of the network sourcing approach is the use of supplier co‐ordination and development, facilitated by a supplier forum known as a supplier association. These associations represent a series of linking pins, extending from the focal purchasing organization, whereby the joint determination of supply chain improvements can be formulated and shared between a focal customer organization and entire groups of suppliers. Argues that the successful exploitation of these associations is a major pillar in developing and sustaining continuous improvement on a supply‐chain sca...
TL;DR: In this paper, the authors describe an information-rich environment for the extended enterprise in which transportation and manufacturing activities are fully integrated into a new product delivery process, in much the same way that mass production is organized around economies of scale.
Abstract: The emergence of the extended enterprise, a group of strategically aligned companies focused on new market opportunities, signals a fundamental change in the nature of competition, a rethinking of traditional supply chain relationships, and a new role for logistics. Because of its ability to span the multiple functions and boundaries of the organization, logistics is poised to become a critical core rather than support function, coordinating and integrating supply chain activities that create both corporate and customer value. This article describes an information-rich logistical environment for the extended enterprise in which transportation and manufacturing activities are fully integrated into a new product delivery process. This process is organized around economies of conjunction in much the same way that mass production is organized around economies of scale. Economies of conjunction derive from the way enterprise members share information and transact their business. Deep information exchange among enterprise members presents opportunities to build knowledge-based logistical tools that create innovative sources of competitive advantage.
Book•
03 Apr 1997
TL;DR: In this paper, the authors present an overview of the supply chain management and logistics strategy. But, they focus on the extended value chain and do not address the challenges associated with the Extended Value Chain.
Abstract: Introduction and Overview Overview of Supply Chain Management and Logistics Strategy Definitions Links with the Extended Value Chain The Supply Chain Planning Process Positioning the Supply Chain and Logistics within your Company Supply Chain Management and Logistics in the Competitive Context Gaining Strategic and Competitive Advantage from Logistics and Supply Chain Management Structuring Supply Chain Capabilities Customer Service Understanding the Customer Building a Customer Focused Supply Chain Functional Excellence Logistics as a Process Forecasting and Inventory Control Transportation and Warehousing Purchasing Information Technology Techniques for Supply Chain Excellence Understanding the Supply Chain Process Cost Analysis and Measurement Analytic Technologies Future Trends and Issues/Broader Context Emerging Logistics Directions Industry and Related Developments Globalization Index
TL;DR: The Modular Consortia approach to production being implemented by such leading-edge automotive manufacturers as Skoda and Volkswagen, is one of the latest experiments in manufacturer-supplier relationships.
TL;DR: In this paper, the authors used data from a longitudinal study of buyer-supplier relationships to evaluate the impact from firms' recent initiatives in developing strategic supplier alliances on the role played by the supply management effort in the corporate hierarchy.
Abstract: The role of supply-chain management as an integral element in corporate strategy has been discussed in prior research, mostly at a broad conceptual level with relatively little empirical validation. This paper uses data from a longitudinal study of buyer-supplier relationships to evaluate the impact from firms' recent initiatives in developing strategic supplier alliances on the role played by the supply management effort in the corporate hierarchy. Contrary to anticipated results, the use of an alliance approach did not lead to any appreciable improvement in status and respect for supply management's role in developing corporate strategy. While several suggestions are offered to explain these results, the major conceptual models of supply-chain strategy are reassessed and a more appropriate and grounded framework for study is proposed. Further research is called for to empirically verify the link between strategic consideration for supply issues and firm success.
01 Jan 1997
TL;DR: In this paper, the authors proposed a diversity of partnerships characterized by an enhanced asset specificity and higher exit and entry barriers for food supply chains, and the implications of such partnerships are a diversity and diversity in the food supply chain.
Abstract: Specific market and production characteristics of food supply chains are motives for vertical coordination in order to gain competitive advantage. Quality assurance systems will only contribute as a facilitating factor. The actual competitiveness of the food supply chain will be determined by the ability to develop successful partnerships. The implications for food supply chains will be a diversity of partnerships characterized by an enhanced asset specificity and higher exit and entry barriers.
TL;DR: The implementation of BPR using innovative application of information technology (IT) aims at flexible, team-oriented, and cross-functionally co-ordinated management.