Nagurney 2006 Supply Chains Are Systems or Term Paper

  • Length: 6 pages
  • Subject: Business
  • Type: Term Paper
  • Paper: #59178773

Excerpt from Term Paper :

Nagurney (2006), supply chains are systems or frameworks through which a product or service is moved from the supplier to the final consumer. This framework can include everything from economic entities to resources, from organizations and companies to activities.

Supply chain surplus is calculated as revenue generated from a customer minus the total cost incurred to produce and deliver a certain product (Chopra, Meindl, Kalra, 2010). For the organic veggie line at Whole Foods, we will calculate the total revenue for the vegetable by multiplying the price per unit with the total number of units. The total costs to deliver the respective veggie will be calculated by adding the costs at the different components of the supply chain: production costs, transportation costs, packaging costs etc. The supply chain surplus is the difference between the two. We want to measure this because it shows how efficient the supply chain is and whether we stand to make a profit or not.

Long-term strategy usually involves strategies that the company conceives for several years. In this case, the supply chain strategic decisions need to determine the volume of vegetables that will be sold, over the next five years, in Whole Foods in a certain region. We want to determine, following this evaluation, what farms can contribute to cover this demand, how much each can supply per year etc.

For the intermediate term planning, the period of time is a quarter of a year to a full year. For this, we will look at transportation issues, notably how to move the products from the farms to the shelves, what are other logistical issues involved in the process etc. For the operational decision making, we are looking at decisions that are done weekly or daily. Here, the decisions are those taken in the store, including where to place the vegetables on the shelves, placing new orders if there are no more vegetables for sale, check the vegetables and throw out those that are no longer fresh etc.

As can be seen, decisions about total volume of vegetables, taken on the strategic level, will affect operational decisions, such as to throw away products that are no longer fresh (operational level).

Customer Order Cycle

Arrival, Entry, Fulfillment, Receiving

Production Order Cycle

Order arrival, Production scheduling, Shipping/logistics, receiving

Strategic Fit

In the case of Whole Foods' organic veggie supply chain the factors that should be taken into account in order to formulate the Competitive Strategy refer to the company's positioning on the market (strategies are different for leaders on the market in comparison with followers), the number of competitors and their power (in markets with numerous suppliers these have reduced power of influence, while a small number of suppliers gives them power to negotiate the rules of the game with their customers), pricing levels (in order to be competitive the company must also address price competitiveness), and the customer base.

The Product Development Strategy must take into account the need for certain products, like organic vegetables, the level of market coverage by competitors, the resources that are necessary for producing and marketing these products, and the profit that is expected in return.

The Marketing and Sales Strategy is one of the most important issues that influence Whole Foods' supply chain. Therefore, it should take into account factors like sales volume that is expected, in order to determine the product quantities that must be supplied, and the duration that these products can spend in different supply chain steps.

The Supply Chain Strategy basically ensures that the company has the right quantity of vegetables to supply, and that no extra vegetable supplies charge the supply chain, or that no insufficient vegetable quantities are evaluated.

Although these strategies seem different from a functional point-of-view, they are interdependent and support each other. They each cannot be developed while not taking into account the resources and objectives applied to the rest of strategies. The Competitive Strategy dictates the type of product must be developed by the product Development Strategy in order to reach competitive objectives. The Marketing and Sales Strategy must take into account the possibilities provided by the Supply Chain Strategy in order to determine how much of the product the company can sell in a given period of time. For example, Whole Food must assess the competition level on the organic veggies market in order to determine whether it needs to introduce new products in offer or the existing ones can satisfy demand. The company's Marketing and Sales Strategy determines the quantity of organic veggies that must be sold in order to reach the established profit margins and that must be incorporated within the supply chain.

Supply Chain Uncertainties

Demand uncertainty refers to businesses having difficulties in accurately projecting customer demand. This is frequent in markets based on seasonal merchandise. Although Whole Food benefits from analyses on customer trends, it is likely that it is sometimes confronted with demand uncertainty because of the seasonality of organic veggies.

Implied demand uncertainty refers to the resulting uncertainty for the supply chain based on the portion of demand the supply chain must handle and attributes the customers' desire. The organic veggies sold b Whole Food are usually predictable in demand. However, there is a percentage of the supply chain that the company estimates to be sold, but customers that it was initially attributed decide the vegetables in case are not necessary and do not purchase them.

Customer responsiveness and cost reduction force companies to improve the efficiency of the supply chain. In the case of Whole Foods, better customer satisfaction usually refers to fresher veggies and products of higher quality. This puts pressure on the supply chain that must rotate products faster. Also, in order to reduce costs, Whole Foods must organize its supply chain in order to match customers' needs. This is not always possible, as it is difficult to determine what types of veggies and in what quantity customers are likely to need at a given period of time. These issues determine increased implied uncertainty.

Supply Chain Responsiveness and Efficiency

Supply chain responsiveness refers to the ability to respond to large ranges of demand, meet short lead times, address different ranges of products, provide innovation, high quality, and handle supply uncertainty. In the case of Whole Food this refers to providing large quantities of vegetables, meeting customers' demand for seasonal veggies, at high quality. However, innovation in this case depends on other factors. The elements that determine higher responsiveness are represented by innovation, high quality, and ability to meet demands.

Supply chain efficiency refers to inversing the cost of producing and delivering the products to customers. In whole Food's case it refers to inversing the cost of purchasing organic veggies from distributors and delivering them to customers. The elements that determine higher efficiency are represented by advance scheduling, appropriate evaluation of consumer demand. High responsiveness usually means higher costs. If Whole Foods want to increase customer satisfaction it would have to provide only fresh veggies which cost more.

Supply Chain Challenges

Whole Food is confronted with several challenges on its supply chain management. Such a challenge is represented by overlooking the importance of online shopping (Brady, 2013). In a business like organic vegetables it is very important to have the merchandise ready when the customer wants it and to be able to deliver it. With online selling it would take longer for the veggies to reach the customers which could alter their freshness, especially since organic food does not contain any preservatives. Inattention to potential risks is another challenge that Whole Food must take into account when managing its supply chain. This refers to the inability in identifying the risks that can produce supply chain damage. Overrelliance on past performance in order to predict future sales can determine Whole Food's supply chain to be excessively charged on some products while not being able to provide sufficient supply of other products.

Drivers of Supply Chain Performance

The main drivers of supply chain performance are facilities, inventory, transportation, information, sourcing, and pricing. Inventory, transportation and facilities determine supply chain efficiency and are responsible for reducing costs (Patra, 2010). Information, sourcing, and pricing determine supply chain responsiveness and are responsible for increasing customer satisfaction. Facilities are usually represented by production sites and storage sites. In order to improve its profitability, Whole Food should have a large number of storage facilities near the most concentrated markets. This reduces the duration of transportation and ensures that customers have fresh vegetables. Regarding its inventory, seasonal inventory is probably the most important inventory type in increasing Whole Food's productivity because it refers to predictable increases in demand that take place at certain times, which is something frequent in the organic veggies business. Transportation can increase productivity by reducing its cost. This means reducing distances and improving the efficiency of fuel consumption at Whole Food.

Information helps Whole Food better coordinates the different supply chain activities. This does not directly increase productivity, but it can be a factor…

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