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• Module overview
• 1. Introduction to supply chain management
  • Introduction
  • 1.1 What is supply chain management?
    • 1.1.1 Supply chain management: The concept
    • 1.1.2 Supply chain management: Evolution
    • 1.1.3 Supply chain management: The search for a definition
    • 1.1.4 Supply chain management: The drivers:
  • 1.2 Technology and supply chain management
  • 1.3 Supply chain management: New business models and challenges
    • 1.3.1 New supply chain business models
    • 1.3.2 Challenges
  • 1.4 Key issues in supply chain management

• 2. Supply chain management and information systems

  • 2.1 Introduction
  • 2.2 Goals of supply chain IT systems
  • 2.3 Supply chain IT goals: Challenges and means
    • 2.3.1 Standardisation
    • 2.3.2 Infrastructure
    • 2.3.3 Electronic commerce
    • 2.3.4 Supply chain management issues and IT
  • 2.4 Integrating the supply chain information systems
  • 2.5 Decision support systems
    • 2.5.1 The characteristics of decision support systems
    • 2.5.2 DSS components
    • 2.5.3 DSS in supply chain management
  • 2.6 Summary

• 3. Logistic network configuration

  • 3.1 Introduction
  • 3.2 The supply chain network
    • 3.2.1 Network design decisions
    • 3.2.2 Design consideration
  • 3.3 Logistics and facility costs in logistics network configuration
  • 3.4 Logistics network design and decision support systems
    • 3.4.1 The supply chain model
    • 3.4.2 Data and a network model
    • 3.4.3 Model and data validation
    • 3.4.4 Solution techniques
  • 3.5 Key features of a network configuration DSS

• 4. Inventory management and risk pooling

  • 4.1 Introduction
  • 4.2 Inventory: Basic concepts
    • 4.2.1 Why hold inventory: Inventory functionality
    • 4.2.2 Inventory related definitions
    • 4.2.3 Inventory related issues
  • 4.3 The inventory policy
    • 4.3.1 Basic inventory decisions and EOQ
    • 4.3.2 Inventory policy under conditions of uncertainty
  • 4.4 Risk pooling
    • 4.4.1 The Square Root Law of Inventory
    • 4.4.2 Centralised versus the decentralised system
    • 4.4.3 Supply chain inventory
    • 4.4.4 Inventory management: Practical issues
  • 4.5 Summary

• 5. Supply chain integration: The value of information

  • 5.1 Introduction
  • 5.2 Information and supply chain integration
    • 5.2.1 The bullwhip effect
    • 5.2.2 The reasons for bullwhip effect
    • 5.2.3 Quantifying the bullwhip effect
    • 5.2.4 Measuring bullwhip effect: The practical issues
    • 5.2.5 Bullwhip effect: Managerial insight
    • 5.2.6 Reducing bullwhip effects
  • 5.3 Effective forecasts and supply chain integration
  • 5.4 Collaborative supply chains and information integration
  • 5.5 Supply chain systems and information integration
  • 5.6 Information and the synchronised supply chain
  • 5.7 Summary

• 6. Supply chain integration: Distribution strategies

  • 6.1 Introduction
  • 6.2 Transportation and distribution
    • 6.2.1 Transport modes
    • 6.2.2 Inbound transportation
    • 6.2.3 Distribution
  • 6.3 Centralised versus decentralised control
  • 6.4 Distribution strategies
    • 6.4.1 Direct shipment
    • 6.4.2 Cross docking
    • 6.4.3 Warehousing and distribution strategies
    • 6.4.4 Transhipment
  • 6.5 Central versus local facilities
  • 6.6 Push versus pull systems
    • 6.6.1 Push systems
    • 6.6.2 Pull systems
  • 6.7 Summary

• 7. Supply chain simulation games:

  • 7.1 Introduction
  • 7.2 The Beer Game
    • 7.2.1 The purpose
    • 7.2.2 The Beer Game scenario
    • 7.2.3 Features and options
  • 7.3 Playing the Beer Game
    • 7.3.1 Beer Game projects
    • 7.3.2 The Beer Game: The learning tool
  • 7.4 The Risk Pooling Game
    • 7.4.1 Playing the Risk Pooling Game
    • 7.4.2 Risk pooling project
  • 7.5 Summary

• 8. Supply chain integration: Strategic partnering

  • 8.1 Introduction
  • 8.2 Strategic partnering
    • 8.2.1 Strategic partnering: A framework
  • 8.3 Supply chain partnership models
    • 8.3.1 Manufacturer and supplier partnership
    • 8.3.2 Strategic partnering with logistics service providers
    • 8.3.3 RSP or retailer supplier partnership
    • 4.3.4 Distributor integration
  • 8.4 Summary

• 9. International issues in supply chain management

  • 9.1 Introduction
  • 9.2 Globalisation and SCM issues
    • 9.2.1 Global business forces
  • 9.3 International supp ly chain - risks and advantages
    • 9.3.1 Risks in international supply chain
    • 9.3.2 Risk management strategies
    • 9.3.3 Risk management framework
  • 9.4 Issues in intern ational supply chain management
  • 9.5 Logistics infrastructure: Regional issues
  • 9.6 Summary

• 10. Product design and supply chains

  • 10.1 Introduction
    • 10.1.1 Matching the supply chain to the product
  • 10.2 Design for logistics
    • 10.2.1 Packaging
    • 10.2.2 Manufacturing: Concurrent and parallel processing
    • 10.2.3 Postponement or delayed differentiation
  • 10.3 Mass customisation and supply chains
  • 10.4 Supply chain is sues and the push-pull boundary
  • 10.5 Summary

• 11. Supply chain management and customer value

  • 11.1 Introduction
    • 11.1.1 The concept of value
    • 11.1.2 Customer service and value
  • 11.2 Supply chain management and customer value
    • 11.2.1 Tailored logistics
    • 11.2.2 Customer value dimensions
  • 11.3 Customer value measures
    • 11.3.1 Customer based measures
    • 11.3.2 Supply chain performance measures
  • 11.4 Information technology and customer value
  • 11.5 Summary

6.5 Central versus local facilities

The distribution strategies are intrinsically linked with the location and number of facilities in the supply chain. We have covered the main considerations for effective decision making regarding facility location, numbers and trade offs involved in chapter 3.

In your text

Read Section 5.6 in your text for a revision of many of the concepts.

You will notice that there are numerous factors which a firm must consider before deciding the number of facilities and the extent of centralisation of its distribution network. The following table sums up these factors.

Table 6.1 Factors affecting the number of warehouses (Coyle et al 2003, pp.321-322)

Factor	Centralised	Decentralised
substitutability	low	high
product value	high	low
purchase size	large	small
special warehousing	yes	no
product line	diverse	limited
customer service	low	high

 

Activity 6.4

Read the Vanity Products case and answer the questions at the end of the case.

Case: Vanity Products

John Vance, president of Vanity Products, is reading the latest financial results reported in the company newsletter. Every time he reads this year's financials, he recalls the company's early days and the struggle to get retailers to stock his new line of bathroom vanities, mirrors and light fixtures. Today, the company is straining to produce enough product to meet retailer demand.

Vanity Products (VP) manufactures a variety of bathroom accessories, including vanities (medicine chests), mirrors, lighting fixtures and shelving. The products are made of rust and chip resistant moulded plastic and come in a variety of modern designs and colors. The plastic construction permits VP to produce a high quality bathroom accessory at an affordable price.

In the middle 1990s, John focused the company's marketing attention on the large home center chain stores: Home Depot, Walmart, Sears and so on. Today, more than 80 percent of VP's sales are to these retail chains, and they account for 95 percent of its growth. Without these chain store customers, VP would still be a small, struggling manufacturer.

John's pleasant memories quickly fade to the realities of dealing with these large chain retailers. In the past two years, VP has been required to install EDI software that permits the buyers to assess VP's inventory data file to determine availability, to place orders and to verify shipment status. The latest demand from one of the chains, which is a precursor of what the others will want, is for VP to reduce cycle time by shipping orders directly to the stores.

Currently, VP receives an order that is a consolidation of store orders to be served from a chain distribution warehouse. The order is sent in truckload quantity to the distribution warehouse, where the individual store order is broken out and sent to the store. Now, each store will be ordering separately, and VP is to deliver the order within five working days.

When John approached Tom White, manager of logistics, with the latest demand, Tom was not very comforting. He indicated that freight costs would certainly increase because VP would be shipping less than truckload quantities at higher freight rates. This higher freight cost could be offset with freight consolidation software that combines store shipments into truckload quantities for peddle runs. John liked the idea of keeping freight costs down, because VP would have great difficulty increasing prices because of competition.

However, the freight consolidation strategy would increase the shipment holding time prior to dispatch, thereby making it difficult for VP to meet the requirement that orders be delivered in five working days. Since cycle time reduction is the primary objective of the chain store's demand, any process adding to the delivery time would not be acceptable.

Tom is working on an idea to establish a series of distribution warehouses in the market areas where the chain stores are located. Tom's vision includes truckload shipments from the plants to the distribution centers, and cross docking of products from incoming trucks to trucks delivering orders to specific stores. In addition, each distribution warehouse would maintain a minimal level of inventory to meet emergency orders placed by local stores. John is skeptical of Tom's distribution warehouse idea because he feels it would increase capital costs, inventory levels and transportation costs. He is not even certain it would meet the delivery time requirements.

Case Questions

1. Analyse the logistics service and cost constraints imposed on VP by the chain store's latest demand.
2. What is your opinion of Tom White's proposal for establishing a series of distribution warehouses?
3. What ownership and management structures would you recommend for the distribution warehouses?
4. Develop a process map depicting the information and product flows in Tom's proposal.

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