Consider the purchase of a can of soda at a convenience store. Describe the various stages
in the supply chain and the different flows involved.
In the formulation of any supply chain, the goal is address customer needs in a cost
effective manner by structuring the flows of information, product, and funds (Chopra, 2019). In
purchasing a can of soda at a convenience store, the supply chain process starts with the
customer and the need for a can of soda. Shekarian et al. (2023) argued that in the heavy
equipment industry, supply chain cost implications and deficient information flow between focal
firms and supply chain partners present barriers to supply chain management practices, stressing
on the importance of customers and cost effectiveness in the management of supply chain. The
convenience store is the next stage of the supply chain process. The convenience store, all things
being equal, has various kinds of soda in refrigerators manufactured from different companies
that were supplied using delivery trucks from the companies or third party transportation
services. The manufacturing companies may purchase ingredients such as foaming agents,
sweeteners, colorings, chemical preservatives etc. from a Tier 1 supplier who may have
purchased the raw materials from lower tier suppliers such as sugar cane farmers. This process
depicts the stages of a convenience store supply chain.
Since supply chain is dynamic in nature and essentially a network of customers,
suppliers, warehouses, transporters, it involves the constant flow of information, product and
funds in the different stages. For example, the convenience store prices the soda, stocks the
fridges and ensures availability and information of the product to the customer. The customer
pays for the soda, and periodically, the convenience store furnishes the manufacturing company
with sales data and inventory orders. Subsequently, sodas are transported from the manufacturing
company to the convenience store and funds are transferred to the manufacturing company or
sole distributor after replenishment. Information concerning pricing and delivery schedules are
also conveyed to the convenience store. Therefore, in a supply chain network, information,
product and fund flows (key flows of supply chain) takes place across the entire supply chain.
Why should a firm such as Dell take into account total supply chain profitability when
making decisions?
The goal of every business in survival. Survival in economic hardships, competitiveness
and unforeseen circumstances. More importantly for manufacturing firms such as Dell, taking
into account total supply chain profitability when making decisions is critical to the survival of
the business because it allows them to optimize their operations and maximize their overall
profitability which is embedded in the net value a supply chain generates. Supply chain
profitability refers to the net value of the difference between customer value and supply chain
cost (Chopra, 2019). For example, a thorough analysis of the entire network of supply chain
enables Dell to identify areas where costs can be reduced. This includes costs associated with
raw materials, manufacturing, transportation, warehousing and distribution. Optimization of
costs can potentially improve its overall profitability. Secondly, a thorough understanding of
demand patterns and lead times at each stage of the supply chain can minimize excess inventory
and reduce carrying costs improving cash flow and profitability. In addition, in times of
economic disruptions and unforeseen circumstances, a thorough design, planning and operation
of a supply chain which potentially increases supply chain profitability ropes in success.
Customer value is embedded in supply chain profitability so it is inherently important that
customer needs are prioritized in supply chain so as to boost supply chain surplus.
What are some strategic, planning, and operational decisions that must be made by an
apparel retailer such as Gap?
A global clothing brand such as Gap touts a lot of success. The success of GAP hinges a
great deal on its supply chain. Decisions relating to the information, product and funds of the
supply chain are crucial to the survival of the firm and as such must be strategically designed,
thoroughly planned and operationally efficient. In strategically designing the supply chain of
GAP, the strategic allocation of resources, both financial in nature and non-financial in nature is
important. Geographical location of manufacturing sites, political stability of country, and the
culture of people living in the country. Effective cost measures should be the aim of a strategic
supply chain design and characteristically, GAP should consider it for a long term basis which
should be robust for both anticipated and sudden market disruptions. In the planning phase of a
supply chain, GAP can make decisions relating to production quantities, promotions as well as
demand and supply of products in certain regions. In the operational decision-making capacity,
shorter times such as daily, weekly and sometimes spontaneity to act is required. GAP can decide
on shipping method and product availability either online or at a warehouse and ensure that the
customer needs are met. Amazon is a prime example of a business that has mastered the art of
operational decision by delivery products overnight or in a matter of hours because of its supply
chain design.
Consider the supply chain involved when a customer purchases a book at a bookstore.
Identify the cycles in this supply chain and the location of the push/pull boundary.
When a customer purchases a book at a bookstore, the process cycle between the retailer
(bookstore) and the customer in this supply chain is the customer order cycle. This process or
relationship in this supply chain is existent as a result of the customer receiving the book and the
retailer receiving funds for the sale of the book. The distributor of books bears a replenishment
cycle relationship with the bookstore. A more books are sold, the bookstore bears the
responsibility of stocking their shelves with more books. The process in this supply chain is the
replenishment cycle. The manufacturing cycle is that which typically exist between a
manufacturing company and a distributor. As the retailer sells more books to customers and
undergoes the replenishment cycle with the distributor, the distributor prompts the manufacturing
company (publishing company or printing press) to request for more books per demands. In
printing the books, ink and paper are used. These products require the use of raw materials from
a low tier supplier. The process of the procurement cycle exist between the printing entity and the
supplier of the raw material.
The push/pull boundary in this scenario does exist in the replenishment cycle and the
customer order cycle. The bookstore anticipates the demand for the book and therefore stock the
shelves of the bookstore. This anticipation of the demand depicts a push boundary because of
speculation or forecast on the part of the bookstore. The bookstore executes all processes in the
customer order cycle after the customer purchase takes place and this constitute the pull
processes. However, in the replenishment cycle process, the book was in stock prior to the
customer purchase, this anticipation of customer purchase is a push process.
Consider the supply chain involved when a customer orders a book from Amazon. Identify
the push/pull boundary and two processes each in the push and pull phases.
Amazon executes all processes in the customer order cycle after the customer orders the book.
Processes in the customer order cycle are pull processes. Since Amazon ensures that the book is
available prior to the order, having inventory in stock is the goal of the replenishment cycle. This
anticipation of demand is speculative and therefore a push cycle. In the pull phase, the arrival of
the customer order is process and in the pull phase, replenishing the books or making it available
is in the push phase.
In what way do supply chain flows affect the success or failure of a firm such as Amazon?
List two supply chain decisions that have a significant impact on supply chain profitability.
The supply chain flow of Amazon consists of the supplier, information, and the product among
the different stages of the supply chain. When a customer makes a purchase online from
Amazon, the customer, Amazon’s warehouse, Amazon’s website, the transporter of the product
purchased, all of Amazon’s suppliers and their suppliers are all part of the network of the supply
chain. Amazon’s website churns out information about pricing and product availability, variety
etc. Amazon’s ability to maximize its supply chain surplus by ensuring great customer value less
its lower supply chain cost has catapulted it to success. Therefore two supply chain decisions that
have a significant impact on supply chain profitability include customer value and the cost
incurred at every stage of a supply chain. Efficient inventory management is essential for a firm
like Amazon, which deals with a vast range of products. The decision of how much inventory to
carry, where to store it, and how to replenish it can significantly impact profitability. Holding
excessive inventory can tie up capital and increase storage costs, while inadequate inventory can
lead to stock outs and lost sales.
Therefore, optimizing inventory levels and implementing effective inventory
management strategies can enhance supply chain profitability. As an e-commerce giant, Amazon
heavily relies on transportation and logistics to deliver products to customers. The decision of
selecting the right transportation modes, carriers, and routes can have a significant impact on
supply chain profitability. Efficient transportation management can reduce costs, improve
delivery speed, and enhance customer satisfaction. Additionally, optimizing warehouse locations
and implementing effective distribution strategies can further improve supply chain profitability
by reducing transportation costs and minimizing order fulfillment time.
List some of the strategic, planning, and operational decisions that an automotive
manufacturer must make with regards to its supply chain.
An automotive manufacturer during its strategic phase should take into perspective the
structure of the supply chain for a longer term, at least five years. Strategically allocating
resources at several stages of the supply chain during this phase sets the tone for the survival of
the business and also serves as a strong foundation. For example, BMW strategically built one of
its biggest sites in Spartanburg, SC., taking into account the proximity of both the port of
Charleston and numerous automotive suppliers. Regarding planning decisions, Chopra (2019)
asserts that, the goal of planning is to maximize the supply chain surplus that can be generated
over the planning horizon given the constraints established during the strategic or design phase.
Unlike the design or strategic phase which spans a longer time frame, the planning phase is
typically short term, six months or up to a year, and an automotive manufacturer can decide
which markets would be supplied from what locations, inventory policies, sub-contracting etc.
Operational decisions span shorter periods than both the design and planning phases. An
automotive firm’s operational decisions ranges from daily to weekly, even sometimes, hours. For
example, deciding times for pick-up trucks to load for customer deliveries, how many hours to
manufacture a quality car and test it.
References
Chopra, S. (2019). Supply chain management: Strategy, planning, and operation (7th ed.).
Pearson Education, Inc.
Shekarian, E., Prashar, A., Majava, J., Khan, I. S., Ayati, S. M., & Sillanpää, I. (2023).
Sustainable supply chains in the heavy vehicle and equipment industry: A multiple-case
study of four manufacturers. Benchmarking: An International Journal,
https://doi.org/10.1108/BIJ-07-2022-0474
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