Chapter 17

Coordination in a Supply Chain

Copyright © 2013 Dorling Kindersley (India) Pvt.

Ltd.
Authors: Sunil Chopra, Peter Meindl and D. V. Kalra Supply Chain Management: Strategy,
Planning, and Operation, 5/e
 Learning Objectives

•Describe supply chain coordination and the bullwhip effect, and their

Copyright © 2013 Dorling Kindersley (India) Pvt.

impact on supply chain performance.

•Identify obstacles to coordination in a supply chain.

•Discuss managerial levers that help achieve coordination in a supply

chain.

Ltd.
Authors: Sunil Chopra, Peter Meindl and D. V. Kalra Supply Chain Management: Strategy,
Planning, and Operation, 5/e
 Supply Chain Coordination & Lack of supply chain
coordination

Supply chain coordination – all stages of the chain

take actions that are aligned and increase total supply chain

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surplus

Requires that each stage share information and take into account
the effects of its actions on the other stages

•Lack of coordination results when:

Information moving between stages is
delayed or distorted

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Objectives of different stages conflict
Authors: Sunil Chopra, Peter Meindl and D. V. Kalra Supply Chain Management: Strategy,
Planning, and Operation, 5/e
 Bullwhip Effect

• Fluctuations in orders increase as they move up

the supply chain from retailers to wholesalers to

Copyright © 2013 Dorling Kindersley (India) Pvt.

manufacturers to suppliers

• Distorts demand information within the supply

chain

• Results from a loss of supply chain coordination

Ltd.
Authors: Sunil Chopra, Peter Meindl and D. V. Kalra Supply Chain Management: Strategy,
Planning, and Operation, 5/e
 Demand at Different Stages

Copyright © 2013 Dorling Kindersley (India) Pvt.

Ltd.
Figure 10-1
Authors: Sunil Chopra, Peter Meindl and D. V. Kalra Supply Chain Management: Strategy,
Planning, and Operation, 5/e
 The Effect on Performance of lack of coordination

•Supply chain lacks of coordination if, each stage optimizes only its local objective
and total profits

Copyright © 2013 Dorling Kindersley (India) Pvt.

•Lack of Performance measures include-
 Manufacturing cost
 Inventory cost
 Replenishment lead time
 Transportation cost
 Labor cost for shipping and receiving
 Level of product availability

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 Relationships across the supply chain

Authors: Sunil Chopra, Peter Meindl and D. V. Kalra Supply Chain Management: Strategy,
Planning, and Operation, 5/e
 The Effect on Performance

Performance Impact of the Lack of

Measure Coordination

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Manufacturing cost Increases
Inventory cost Increases
Replenishment lead time Increases
Transportation cost Increases
Shipping and receiving cost Increases
Level of product availability Decreases
Profitability Decreases

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 Table 10-1

Authors: Sunil Chopra, Peter Meindl and D. V. Kalra Supply Chain Management: Strategy,
Planning, and Operation, 5/e