FINAL EXAM STUDY GUIDE

• This study guide summarizes key concepts and examples related to sales and operations planning, supply chain coordination, inventory management, transportation, sourcing, pricing, sustainability, and the bullwhip effect.

Sales and Operations Planning (S&OP)

• S&OP aligns a company’s supply and demand by balancing production and sales.
• Red Tomato utilizes S&OP to plan production schedules, manage inventory, and ensure timely product availability for customers.

Predictable Variability

• Predictable variability refers to demand fluctuations that can be forecasted based on patterns, like seasonal demand.
• Retailers prepare for holiday demand spikes by increasing inventory and adjusting production accordingly.

Lack of Coordination

• Lack of coordination occurs when different entities within a supply chain don’t share information or goals, which causes inefficiencies.
• Misalignment between departments at Webvan contributed to the company's failure.

Obstacles to Coordination

• Silos limit information sharing
• Misaligned incentives exist
• Lack of trust between supply chain partners is present
• Borders' failure to adapt to online sales, unlike Amazon, was due to a lack of coordination in adapting to online sales.

Managerial Levers to Improve Coordination

• These are tools management can use to improve alignment within the supply chain.
• Vendor Managed Inventory (VMI) systems improve information flow and reduce stockouts. The supplier manages stock at the retailer’s location.

Cycle Inventory

• Inventory is ordered in batches to take advantage of economies of scale.
• A manufacturer ordering large quantities of raw materials in bulk lowers per-unit costs.

Economies of Scale

• Cost advantages are gained by increasing the scale of production.
• Walmart leverages large purchase volumes to negotiate better pricing with suppliers.

Quantity Discounts

• Discounts offered for purchasing larger quantities.
• MoonChem negotiates with suppliers for lower prices based on bulk orders.

Safety Inventory

• Extra inventory held to protect against uncertainty in demand or supply.
• Amazon holds safety stock to cover fluctuations in demand, ensuring product availability during unexpected spikes.

Impact of Supply Uncertainty

• Unreliable supply chain processes affect the levels of safety stock.
• Apple adjusts its safety inventory based on unpredictable delays from its suppliers, especially for components like microchips.

Replenishment Policies

• Policies determining when and how much inventory to replenish.
• A retailer might use a just-in-time replenishment policy, ordering products as stock runs low to reduce inventory holding costs.

Product Availability

• Fulfilling customer demand by having the right product available at the right time.
• Zara achieves high product availability by rapidly replenishing stock in stores based on real-time sales data.

The Value of Speed in a Seasonal Supply Chain

• Faster response times to customer demand can provide competitive advantage, especially in seasonal markets.
• Zara releases new designs every few weeks to match rapidly changing fashion trends, keeping inventory fresh and aligned with customer needs.

Postponement

• The strategy of delaying final product configurations until customer demand is clear.
• Dell postpones assembly of PCs until after the customer order is received, ensuring product customization.

Transportation Modes

• Different methods of transporting goods, such as air, rail, truck, and sea.
• FedEx uses air freight for fast delivery of urgent packages. Maersk uses container ships for bulk goods.

Trade-Offs in Transportation Design

• Trade-offs involve the balancing act between cost, speed, and flexibility in transportation.
• Options include choosing between rail transport (cheaper but slower) and air freight (faster but more expensive) for shipping products.

Tailored Transportation

• Customization of transportation solutions is based on specific supply chain needs.
• Amazon tailors delivery strategies by using local delivery services and drones for fast, last-mile deliveries.

Sourcing Decision

• The decision of where to source goods or services from, either locally or globally.
• Toyota sources some parts locally in Japan, while importing others from China to balance cost and lead time.

Total Cost of Ownership (TCO)

• TCO is the comprehensive cost of acquiring a product or service, including hidden costs like shipping, warehousing, and quality checks.
• Polaris Industries evaluates the total cost for components, like transportation, inventory holding, and potential product failure.

Tailored Sourcing

• Customizing sourcing decisions is based on the type of product and market conditions.
• Nike sources high-end sneakers from specialized, high-cost factories but they mass-produce basic footwear in lower-cost countries.

Differential Pricing

• Charging different prices to different customer segments based on demand and willingness to pay.
• Airlines offer cheaper tickets during off-peak times or for early bookings.

Dynamic Pricing

• Adjusting prices are based on real-time demand and market conditions.
• Uber uses surge pricing to adjust fares based on demand in specific locations and times.

Discounting and Peak Pricing

• Lower prices are offered during low-demand periods. Higher prices are offered during peak demand periods.
• Hotels offer discounts for early bookings but charge higher prices during holidays or special events.

The Role of Sustainability in a Supply Chain

• Incorporating environmental and social factors into supply chain operations to minimize negative impact.
• Unilever focuses on sustainable sourcing of palm oil and reducing carbon emissions in its supply chain.

Corporate Social Responsibility (CSR)

• The responsibility of companies to act ethically, considering the social and environmental impacts of their actions.
• Patagonia ensures its supply chain uses ethical labor practices and promoting eco-friendly products.

Incentives and Regulation for Sustainability

• Regulations and incentive programs encourage companies to adopt sustainable practices.
• Governments offer tax breaks for companies that invest in renewable energy sources, like Tesla.

Bullwhip Effect

• Small fluctuations in customer demand lead to larger fluctuations in orders placed upstream in the supply chain.
• A small increase in customer demand for a product causes a retailer to order more from its wholesaler, who places an even larger order with the manufacturer. The manufacturer might overproduce based on this amplified demand signal, leading to excess inventory.

This study guide summarizes key concepts related to sales and operations planning and supply chain coordination. Topics covered include inventory management, transportation, sourcing, pricing, sustainability, and the bullwhip effect. Examples are provided to illustrate key concepts.