Current Lecture Lecture 19CHAPTER 13SCM 3301 1st EditionCurrent Lecture Lecture 19CHAPTER 13Obstacles to Supply Chain Integration The Silo Mentalityo Acting only in regard to a single department within the firm or a singlefirm with the supply chain (local optimization) Lack of Supply Chain Visibilityo The inability to easily share or retrieve trading partner information Lack of Trusto Unwilling to work together or share information Lack of Knowledgeo Lack of process or information system skillsThe Bullwhip Effect Indication (Symptoms)o Poor Capacity Planning Supply/Demand Integration (Balance)o Excess Inventory High inventory Carry Costs/Low Turnovero Stock-outs Low Customer Service Levelso Excess Supply Chain Costs Demand Forecast Updatingo Order variability creates variability in forecastso Solutions: CPFR, Vendor Managed Inventory (VMI) Order Batchingo Artificial batching of orders creates additional variation (end-of-quarter) Price Fluctuationso Sales create artificial demand variability Rationing and Shortage Gamingo Rationing of product inflates subsequent ordersManaging Supply Chain Risk Managing Supply Chain RiskSCM 3301 1st Editiono Increase safety stocks and forward buying (stockpiling)o Identify backup suppliers and logistics serviceso Diversify the supply base (supply redundancy)o Utilize a supply chain IT system (across supply chain, i.e., ERP)o Develop a formal risk management
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