Dr Andrea Gyarmathy

andrea.gyarmathy@gcu.ac.uk
Department of Business Management
Glasgow School for Business and Society

Operations Management

Supply Chain Management Part 2

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 Key Barriers to Successful SCM
SMC is a holistic approach to managing across the boundaries of companies
and of processes.

• Lack of systems
capability “Many of the technical problems can be
• Complacency overcome to make the supply chain
more effective.....the major resistance
• Mistrust
comes from the people involved.”
• Power games

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Topic Video – Future Supply Chain

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 Bullwhip Effect
Forecast accuracy decreases as one moves upstream along
the supply chain.

Causes of Bullwhip effect

• Demand forecast updating is done individually by all members of a supply chain. The more
members in the chain, the less these forecast updates reflect actual end-customer demand.
• Order batching occurs when each member takes order quantities it receives from its
downstream customer and rounds up or down to suit production constraints such as
equipment setup times or truckload quantities.
• Price fluctuations due to
inflationary factors, quantity
discounts, or sales tend to
encourage customers to buy
larger quantities than they
require.
• Rationing and gaming is
when a seller attempts to limit
order quantities by delivering
only a percentage of the order
placed by the buyer

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Sample Bullwhip effect
This table present a typical bullwhip effect scenario, which shows us
fluctuations of production levels along supply chain in response to small
change in end-customer demand.
This is a four-stage supply chain where an original equipment manufacturer
(OEM) is served
by three tiers of
suppliers

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 Controlling Supply Chain Dynamics

1. Reduce Bullwhip effect:

improving supply chain performance is to reduce the bullwhip effect

2. Channel alignment:
adjustment of scheduling, material movements, stock level, pricing,
and other sales strategies within the entire supply chain
What do you think how?
3. Operation and supply chain
efficiency
Each operation in the chain makes
to reduce its own complexity, e.g.
cost and time to doing business
with each other

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Supply Chain Integration – The common goal
Share information among supply chain members: Collaborative
planning, forecasting, replenishment (CPFR)

– Reduced bullwhip effect

– Early problem detection
– Faster response to demand
– Quicker to market
Benefit of adopting the new business
models and technologies
– Penetration of new markets
– Creation of new products
– Improved efficiency
– Mass customization

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Case: Does Apple really have the best supply chain
in the world?
Apple is often credited with having the ‘best
supply chain in the world’

Apple introduce its products frequently with new

technology all over the world
The success lies within the connection between
Apple’s products and its supply chain

Detailed advanced planning: Apple integrates

all its research and development, marketing,
purchasing, outsourced manufacturing and
logistics functions together

Acquiring exclusive rights from its suppliers to

secure strategic raw materials and components

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Case: Does Apple really have the best supply chain
in the world?

The relationship with suppliers is vital.

Apple financial muscle guarantee sufficient supply
capacity by placing large pre-orders with suppliers
and prevent competitors to gaining access to the
same resource

Apple supply chain is designed to give maximum

visibility to every of its supplier

This approach started when Apple started to refine

its relationship with suppliers
Conventionally outsourcer arrange its own supply
but Apple takes grate control over the procurement
of components for its suppliers.

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Case: Does Apple really have the best supply chain
in the world?
Apple hired hundreds of engineers and supply
chain managers in Shanghai and Taipei to help its
supplier

But the extensive outsourcing is coming with huge

risk, e.g. natural disaster, local regulation and
international trade agreement changes,
reputational risk, etc..

Criticism of the work practice in extended supply

chain in Asia, e.g. number of suicides at a giant
factory in China

Apple extensive effort to have an annual report on

its improvement with its supplier in Asia which is a
model for other companies

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‘Functional’ versus ‘innovative’ products

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Matching the operations resources in the
supply chain with market requirements

Source: Adapted from Fisher, M.C. (1997) What is the right supply chain for your product? Harvard Business Review,
March–April, pp. 105–116. 12
Types of supply network arrangement

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Thanks for the attention!

Any questions?

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 References
• Rogers, P. A. (2005), “Optimising supplier management and why co-dependency equals
mutual success”, Journal of Facilities Management, Vol. 4 No. 1, pp. 40-50.
• Russell R.S. & Taylor B.W. (2016) Operations Management & Supply Chain
Management, 9th Edition, Wiley
• Simchi-Levi D., Kaminsky P., Simchi-Levi E., Bishop W. (2007), Designing and Managing
the Supply Chain
• Johnston, Clark & Shulver (2012) - Ch 3 “Managing Supply networks and supplier
relationships’
• Hill & Hill (2011), Essential Operations Management, Palgrave MacMillan.
• Ogden, S. M. and McCorriston, E., (2007) “How do supplier relationships contribute to
success in conference and events management?”, International Journal of
Contemporary Hospitality Management, vol 19, no 4 pp 319-327.
• Srivastava,S.K. (2007), ‘Green Supply Chain Management: A state of the art literature
review’, International Journal of Management Reviews, Vol 9 Issue 1, pp53-80.

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