Part Two | Chapter 5

Managing the lead-time frontier

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Chapter 5 | Managing the lead-time frontier
Chapter objectives

The intended objectives of this chapter are to:

 introduce time-based competition definitions and concepts;
 show how the lead time needs to be managed to serve customer expectations;
 explain how organisations compete through responsiveness.

By the end of this chapter you should be able to understand:

 how organisations compete through managing lead time;
 how time can be used as a performance measure;
 P-times and D-times and the consequences when they do not match;
 different solutions to reduce P-times.

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Chapter 5 | Introduction

 Competing on time is the principle of taking timely completion of supply chain tasks to a higher level: that of
compressing cycle times for supply chain operations for internal and external benefits.
 External benefits include:
 lowering overall cycle time and providing faster services;
 outrunning competition.
 Internal benefits include:
 shorter cash-to-cash cycles, thereby releasing working capital, improving liquidity and reducing asset intensity of the supply
chain (as discussed in detail in Chapter 3);
 lowering inventories in the supply chain by speeding up turnover times for work in progress and inventory.

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Chapter 5 | 5.1 The role of time in competitive advantage
Time-based competition: definition and concepts

 The trade-off between cost and quality can be altered by preventing defects from happening in the first place
through such measures as:
 designing the process so that defects cannot occur (error proofing);
 designing products so that they are easy to make and distribute;
 training personnel so that they understand the process and its limitations.
 Relationships that need to be understood and harnessed include recognising that:
 costs do not have to increase in order to improve quality – they can reduce;
 costs do not have to increase when lead times are reduced. It may be possible to reduce both in some processes by reducing
waste in terms of unnecessary transportation or inventory, for example (refer to Chapter 7 for a detailed account of wastes);
 costs do not have to go up as product variety increases and times reduce – they can also reduce.

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Chapter 5 | 5.1 The role of time in competitive advantage
Variety and complexity (1)

 “A system is complex when it is difficult to formulate its overall behaviour, even when given almost complete
information about its components and their relationships” (Edmunds, 1999)
 Two types of variety
 External variety: the choice offered to the end-customer, or potential finished product SKUs. Example from automotive:
 2 body styles * 15 power train combinations * 19 painted body colours * 15 trim colours * 70 factory fitted options = 5 600,000 variations
 Internal variety: converts external variety into the internal requirements placed onto the supply chain.
Holweg and Pil (2004) measured internal variety at three levels in the product structure: the basic product (models and body
styles), intermediate (such as power trains, wiring harnesses and body colours), and peripheral (number and variety of
components used).

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Chapter 5 | 5.1 The role of time in competitive advantage
Variety and complexity (2)

 Cooper and Griffiths (1994) state that ‘issues of variety and complexity are strongly linked’, and list three rules for
managing complexity:
 Increased variety tends to add to the complexity of logistics operations, and so increases both direct and indirect costs.
 Variety should be increased only when it contributes to added value. Heineken, the Dutch beer manufacturer, reduced SKUs
from 2,500 across Europe to SKUs in their 10s. The ‘right’ level of product variety starts with consumer research (Mahler and
Bahulkar, 2009) rather than ‘tail cutting’ (Activity 2.1).
 System redesign can enhance added value through reducing the cost impact of an increase in variety. The antidote to
complexity is simplicity, so auto manufacturers have implemented several ways to offer external variety without making
internal operations too complex.

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Chapter 5 | 5.1 The role of time in competitive advantage
Time-based initiatives

 Time-based initiatives
 First focus: shorter cycle times and faster inventory turns
 Positive “side effect”: Lower overhead costs and costs of dealing with breakdowns and delays

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Chapter 5 | 5.1 The role of time in competitive advantage
Time-based opportunities to add value (1)

 Increased responsiveness to customer needs – many elements of customer service are dependent upon time,
e.g. how long it takes to deliver a product or service, achieving on-time delivery and how long it takes to deal
with customer queries, estimates and complaints
 Managing increased variety - reducing overall lead time, product complexity and process set-up times, the
production of a particular product can be scheduled more frequently with smaller production batches
 Increased product innovation - shortening of product development lead time means that innovations can be
capitalised on to maximum effect

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Chapter 5 | 5.1 The role of time in competitive advantage
Time-based opportunities to add value (2)

 Improved return on new products - Reducing product

development lead time means that a product can get to
market earlier, benefits include:
 the sales life of the product is extended;
 a higher price can be charged;
 new customers can be won;
 a high market share can be won through building upon the
initial lead.
 Reducing risk by relying less on forecasts - only two
types of forecasts exist: wrong ones and lucky ones

Improved return on new products: Break-even time

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Chapter 5 | 5.1 The role of time in competitive advantage
Time-based opportunities to reduce cost

 Reducing the need for working capital - Increasing the speed of flow through processes by eliminating
unnecessary steps and wasted time, reduces the amount of money tied up in the system
 Reducing the need for plant and equipment capital - If the equipment can no longer be used to generate
revenue, all it does is incur further costs, such as maintenance, and the floor space it occupies will have many
better uses
 Reducing development costs - Shortened lead times in product development are achieved in part by more
effective use of development resources through elimination of rework and reduction of distracting superfluous
projects
 Reducing quality costs - One of the main elements in improving quality is to reduce the time between an error
being made and the problem being detected

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Chapter 5 | 5.1 The role of time in competitive advantage
Limitations to time-based approaches

 Need for speed and the degree of speed required

 Not all operating environments require speed, e.g. high-
volume, low-value commodity products
 Not all customers value speed as they may be able to order
well in advance of delivery
 Superior performance only being achieved on a limited
number of occasions

Distribution of shipment cycle times in days

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Chapter 5 | 5.2 P:D ratios and differences
Using time to measure supply pipeline performance

 P-time and D-time are measures of performance of

the supply pipeline
 P-time
 How long it takes for a product or service to pass
through the total supply process. This measure is used
to identify the total logistics lead time, also known as the
P-time or production time. The P-time is a measure of the
total time it takes for a product to go through a pipeline.
Thus it includes source, make and deliver lead times: it is
not just the time it takes to supply from stock.
 D-time
 The time for which customers are willing to wait to
have their demand fulfilled is the D-time or demand time. Getting ideas to market
It is measured from when the person in the customer
company realises they have a need and the end point is
when the product is received by that person.

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Chapter 5 | 5.2 P:D ratios and differences
Consequences when P-time is greater than D-time

 P-time should be measured for each separate

product group  might have different internal
processes
 D-time should be measured for each different
market segment that is served  customers may
have different needs
 Assemble to order (ATO), e.g. Dell
 Customer order decoupling point (CODP)

When P-time is > D-time

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Chapter 5 | 5.2 P:D ratios and differences
Activity

Assess the benefits and concerns that may arise as a result of the relative sizes of P-time and
D-time. Compile your views in the table.

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Chapter 5 | 5.3 Time-based process mapping
How do you go about measuring time in a supply network? (1)

 Stage 1: Create a task force

 Stage 2: Select the process to map
 Stage 3: Collect data
 Stage 4: Flow chart the process
 Stage 5: Distinguish between value-adding and non-
value-adding time

Example of process document

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Chapter 5 | 5.3 Time-based process mapping
How do you go about measuring time in a supply network? (2)

 Stage 6: Construct the time-based process map

 Stage 7: Solution generation

Process activity mapping and sources of waste

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Chapter 5 | 5.3 Time-based process mapping
Example: Electro-Coatings Ltd (1)

1. Walk the process (12 key processes identified)

2. Detailed steps (60 steps)

1 2

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Chapter 5 | 5.3 Time-based process mapping
Example: Electro-Coatings Ltd (2)

3. Differentiation between value adding and non

value adding processes
4. Map with the value-adding (activity) time and non-
value-adding (wasted) time shown as the series of
11 steps (etch and plate were combined) against
total elapsed time in hours

3 4

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Chapter 5 | 5.3 Time-based process mapping
Example: Electro-Coatings Ltd (3)

5. Create a cause-effect diagram

6. Re-engineered time-based process map

5 6

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Chapter 5 | Managing the lead-time frontier CASE STUDY
Case study: time-based process mapping

In groups of five
9. Select one process of your company and create a time-based process
map (use public sources an estimates for the times involved).

Duration: 40 minutes

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Chapter 5 | 5.4 Managing timeliness in the logistics pipeline
When P-time is greater than D-time, what time-based strategies and practices can help to improve
competitiveness?

 Make to stock (MTS)

 offer products for customers to buy from available inventory
 key performance measure in supermarkets is on-shelf availability (OSA)
 requires that models are determined for stock replenishment – how much, when and where
 Assemble to order (ATO)
 shifting the decoupling point (CODP) upstream, it is possible to greatly reduce risk
 design flexibility required in terms of components, options, and modules
 Make to order (MTO)
 CODP is moved to product design to further reduce risk
 E.g., by developing standard modular designs

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Chapter 5 | 5.4 Managing timeliness in the logistics pipeline
Strategies to cope when P-time is greater than D-time

 Marketing - ask the customer to cooperate by supplying more detailed demand information at an earlier stage,
e.g. by locating one of your people in the customer’s scheduling process
 Product development - with time-based thinking in mind, next-generation products can be designed for ‘time
to market’
 Process improvement - engineer processes to eliminate unnecessary steps, and take wasted time out of those
that remain

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Chapter 5 | 5.4 Managing timeliness in the logistics pipeline
Practices to cope when P-time is greater than D-time

Ways to reduce P-time

 Control by optimising throughput and improving process capability
 Simplify by untangling process flows and reducing product complexity
 Compress by straightening process flows and reducing batch sizes
 Integrate by improving communications and implementing teams
 Coordinate by adding customer-specific parts as late as possible
 Automate with robots and IT systems

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Chapter 5 | 5.5 When, where and how?
Grouping of tactical considerations

 When? Time-based competition is only as relevant as the customer perceives it to be. Speed for the sake of
speed can create unnecessary costs, and can cut corners, leading to poor quality.
 Where? D-times are a measure of the importance of speed as a competitive factor, whilst P-times measure the
ability to deliver. The integration of the two measures the point at which the customer order penetrates the
supply chain.
 How? The more predictable and lower-priority products and components can be delivered from inventory with
less priority given to speed. Shipments of customised products can be assembled from stocks of standard
components and modules within the D-time demanded.

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Chapter 5 | Managing the lead-time frontier
Chapter summary (1)

 What is the lead-time frontier?

 Competing on time demands a fast response to customer needs. Time-based
approaches to strategy focus on the competitive advantage of speed, which helps a
network to cope with variety and product innovation, whilst also improving returns on
new products. Speed also means less reliance on long-term forecasts.
 Speed of response helps to lower costs by reducing the need for working capital, and
plant and equipment. It also helps to reduce development costs and the cost of quality.
 The lead-time frontier is concerned with reducing P-time (time needed to produce a
product or service) to less than D-time (time for which the customer is prepared to
wait).
 Differences between P-times and D-times are referred to as the lead-time gap. The gap
has strategic implications for marketing, product development and process development.
P-time can be reduced by a six-stage process: control, simplify, compress, integrate,
coordinate and automate.

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Chapter 5 | Managing the lead-time frontier
Chapter summary (2)

 How do we measure and implement time-based strategies?

 Time-based mapping aims to generate visibility of time in the supply network. A
seven-step approach to mapping involves creating a task force, selecting the process,
collecting data, distinguishing between value-adding and non-value-adding activities,
constructing the time-based process map and generating a solution.

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Part Two | Chapter 6

Supply chain planning

and control

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Chapter 6 | Supply chain planning and control
Chapter objectives

The intended objectives of this chapter are to:

 explain the processes by which material flow is planned and executed within a focal firm
and between partners in a supply chain;
 describe the principles of just-in-time and its implications for logistics;
 explain how just-in-time can be applied in combination with material requirement
planning;
 explain the initiatives that have been developed to overcome poor coordination in retail
supply chains.

By the end of this chapter you should be able to understand:

 appreciate the sophistication that lies behind an integrated model of material flow in a
supply chain, and why this model is so easily corrupted;
 understand how corruption of flow causes loss of focus on ability to meet end-customer
demand;
 understand just-in-time pull scheduling where parts are pulled through the chain in
response to demand from the end-customer;
 recognise enemies of flow in the supply chain;
 appreciate initiatives that have been developed to restore flow.

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Chapter 6 | 6.1 The supply chain ‘game plan’
Planning and control within manufacturing (1)

 A manufacturing planning and control (MPC) system is to meet customer requirements by enabling managers to
make the right decisions
 Three time horizons are involved for source, make, deliver processes:
 Long term - decisions about capacity provision; strategic in nature (e.g., how much capacity is needed, when and of what
type); year based
 Medium term - match supply and demand; month based
 Short term - meet day-to-day demand as it unfolds; day based

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Chapter 6 | 6.1 The supply chain ‘game plan’
Planning and control within manufacturing (2)

 Demand management
 Resource planning
 Sales and operations planning (S&OP)
 Master production scheduling (MPS)
 Material and capacity planning (engine
room)
 MPC execution systems (back end)

The focal firm ‘game plan’

(Source: From Manufacturing Planning and Control for Supply Chain Management, 5th ed., McGraw-Hill)

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Chapter 6 | 6.1 The supply chain ‘game plan’
Managing inventory in the supply chain (1)

 ‘Economic’ batch sizes (EBQ) and order

sizes (EOQ)
 Optimising the trade-off between
changeover cost between one batch and
the next and inventory carrying cost
 Changeover cost per unit, 𝐶𝐶𝑠𝑠 . The cost
associated with changing over a given
machine from the last good part from a
batch to the first good part from the
succeeding batch.
 Inventory carrying cost, C. The cost of
holding stock, calculated from the total
inventory cost and the annual rate charged
for holding inventory.
When: the re-order point

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Chapter 6 | 6.1 The supply chain ‘game plan’
Managing inventory in the supply chain (2)

 Wilson formula
 2𝑧𝑧𝐶𝐶𝑠𝑠 /𝑐𝑐𝑐𝑐
 The trade-off this time is between the
cost of placing an order and inventory
carrying cost, where
 Cost of placing an order: All order-related
costs, including purchase department costs,
transportation costs from the supplier, and
goods-in inspection and receiving.

Economic batch quantity (EBQ)

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Chapter 6 | 6.1 The supply chain ‘game plan’
Managing inventory in the supply chain (3)
Economic order quantity example

 Periodic order quantity and target stock levels

 Periodic review
 Target stock level (TSL): Order quantity 5 Target stock level 2 Stock on
hand 2 Stock on order
 TSL = cycle stock – safety stock
= 𝐷𝐷 ∗ 𝑇𝑇 + 𝐿𝐿𝐿𝐿 + 𝑍𝑍 ∗ o∗ (𝑡𝑡 + 𝐿𝐿𝐿𝐿)
 D = average daily demand per SKU, T = review period in days and LT =
lead time in days. Z = number of standard deviations from the mean
corresponding to the selected service level, and o = standard deviation
of demand over T + LT

Periodic order quantity example

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Chapter 6 | 6.1 The supply chain ‘game plan’
Planning and control in retailing

 Retailing is faced with planning and control challenges that

are quite distinct from manufacturing
 No sales without stock
 On-shelf availability (OSA) as a KPI with a wide range of different
products
 Several stages of the internal supply chain must be coordinated
(depots, back of store and front of store)
 Tight retail profit margins (2-4 % vs. 8-10% for branded
manufacturers)
 Challenging demand forecasting EPOS data for the last five weeks
 ‘Best before’ and ‘use by’ dates for fresh produce increase
obsolescence pressures and inventory turns
 More difficult reverse logistics because one store needs to send
back to multiple suppliers

EPOS - electronic point of sale

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Chapter 6 | 6.1 The supply chain ‘game plan’
Inter-firm planning and control (1)

 Relatively sophisticated modelling data are needed to enable accurate and timely planning and control of
logistics in a focal firm
 The greater the product variety, the more component parts and the greater the number of levels in the BOM,
the more challenging the task.
 Challenges resulting from differenced between the partners
 Differences in process technology - e.g. a supplier of aluminium cans to a soft drinks manufacturer is positioned between
producers of aluminium rolled sheet, and high speed canning lines
 Differences in working routines - shift patterns, conditions of employment, holidays and shut-downs are but a few of the
possible differences in working routines between partners in a supply chain
 Priority planning - whilst an order for a major customer may be priority number 1 for the focal firm, the existence of the
order may not be visible to upstream partners
 Inadequacies in MPC systems design - e.g. impossibility to change from MTS to MTO due to long MPR planning intervals

MPC - manufacturing planning and control

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Chapter 6 | 6.1 The supply chain ‘game plan’
Inter-firm planning and control (2)

 Poor coordination within a supply network causes

the bullwhip effect
 Four major causes (Lee et al.,1997)
 updating of demand forecasts: resulting in changes to
safety stock and stock in the pipeline;
 order batching: whilst retail customers may buy mostly
on Saturdays, MPC systems may batch orders according
to different timing rules;
 price fluctuations: promotions most often result in
lumping of demand into peaks and troughs, when the
ongoing pattern is stable;
 rationing and shortage gaming: when the latest games
console is in short supply, retailers are rationed by The ‘bullwhip effect’ at work
manufacturers. Customers place multiple orders on
different retailers and thus create apparent demand
amplification.
MPC - manufacturing planning and control
RDC – regional distribution center
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Chapter 6 | 6.2 Just-in-time (JIT) scheduling
What are the implications of just-in-time for logistics? How can just-in-time principles be applied to
other forms of material control, such as material requirements planning?

 Two systems for controlling materials

 Pull scheduling - user signals to the maker or provider that more material is needed. Material is sent only in response to
such a signal
 Push scheduling - makers and providers make or send material in response to a pre-set schedule, regardless of whether the
next process needs them at the time

MPC - manufacturing planning and control

Push–pull strategy - Wikipedia
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Chapter 6 | Supply chain planning and control CASE STUDY
Case study: push/ pull boundary

In groups of five
10. Depict the basic process of your product through the supply chain
and state, where the push/ pull boundary (also: cutomer order
decoupling point) should be. Justify your decision.

Duration: 20 minutes

The Roles of Distributor in the Supply Chain – Push-pull Boundary | Semantic Scholar

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Chapter 6 | 6.2 Just-in-time (JIT) scheduling
The just-in-time system

 Factor 1  Factor 6
 full capability for just-in-time supply  the levels of work in progress and other types of inventory
 Factor 2 have a significant impact upon the visibility of a process.
 delay and inventory interact with each other in a system of
positive amplification
 Factor 3
 defects lead to delays
 the likelihood of defects leads to safety stocks
 Factor 4
 unplanned downtime, planned maintenance, changeover
times
 Factor 5
 visible flow through a process enables a better
understanding of people´s work and how they themselves
The pyramid of key factors that underpin JIT
affect others

MPC - manufacturing planning and control

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Chapter 6 | 6.3 Overcoming poor coordination in retail supply chains
How can collaboration be extended across the supply chain to focus on meeting consumer demand?

 Four collaborative approaches to improve supply coordination, which originated in retail supply chains:
 Efficient consumer response (ECR) that has been targeted primarily in food and fast-moving categories in the grocery
sector.
 Collaborative planning, forecasting and replenishment (CPFR) that is also used predominantly by manufacturers and
retailers in the grocery sector, although other sectors where there is a broad range of SKUs subject to volatile demand also
use this approach.
 Vendor-managed inventory (VMI) is used for retail inventory but, equally, is applied to inbound supplies for manufacturers
in industrial supply chains
 Quick response (QR) has been targeted primarily at non-food categories.

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Chapter 6 | 6.3 Overcoming poor coordination in retail supply chains
Efficient consumer response (ECR) (1)

 Promotional on-shelf availability: insight and practice

 Supply chain waste prevention
 Prevent
 Redistribute
 Recycle
 Recover
 Dispose
Top-level estimates of food and drink waste
 Merchandising unit guide along the UK grocery supply chain
 Optimising transport modes (Source: WRAP report, Lee and Willis, 2010)
 Electronic data interchange (EDI)

ECR UK waste hierarchy

(Source: ECR UK website, 2013)

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Chapter 6 | 6.3 Overcoming poor coordination in retail supply chains
Efficient consumer response (ECR) (2)

 Radio frequency identification devices (RFIDs)

 tracking products throughout the distribution pipeline (‘asset
tracking’) to provide continuous quantities and position by SKU
in the supply chain;
 tracking products through back of store to the shelf;
 intelligent shelves, whereby ‘sweeping’ of product by thieves
from shelves in store shows up automatically and raises alarm
signals;
 registering sales without involving a cashier: a fancied future
state is one where shoppers push their trolley past readers that
automatically read EPCs for each item in the trolley, and
present the bill for credit card payment to the shopper without An RFID system
the need for retailer personnel to be involved.

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Chapter 6 | 6.3 Overcoming poor coordination in retail supply chains
Collaborative planning, forecasting and replenishment (CPFR) (1)

 Structured approach to CPFR implementation (VICS

CPFR Guidelines, 1998)
1. Develop front-end agreement.
2. Create joint business plans.
3. Create individual sales forecasts.
4. Identify exceptions to sales forecasts.
5. Resolve/collaborate on exception items.
6. Create order forecast.
7. Identify exceptions to order forecast.
8. Resolve/collaborate on exception items.
9. Generate orders.

The nine steps of CPFR process | Download Scientific Diagram (researchgate.net)

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Chapter 6 | 6.3 Overcoming poor coordination in retail supply chains
Collaborative planning, forecasting and replenishment (CPFR) (2)

 Benefits of electronic collaboration  Process completion in quick timescale, at lower total cost
 Improved availability of products to consumer, more sales  All trading partners become more committed to the shared
 Total service is improved, total costs are reduced (including plans and objectives. Changes are made with more care,
inventory, waste, and resources), and reduced capacities by and are immediately visible to all.
reduced uncertainty
 Inter-company processes become far more integrated and
hence simple, standard, speedy and certain
 Quicker, more structured, and transparent communication
of information across the supply chain to all authorised
users
 audit trail can be provided to say when information was
amended
 Email prompts can update users of variance and progress,
and can confirm authorisations
 System data use for monitoring and evaluation purposes

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Chapter 6 | 6.3 Overcoming poor coordination in retail supply chains
Vendor-managed inventory (VMI) (1)

 “Vendor-managed inventory (VMI), is an approach to

inventory and order fulfilment whereby the supplier,
not the customer, is responsible for managing and
replenishing inventory.”
 Automated vs. manual VMI
 How it works
 Supplier tracks its customers’ product sales and inventory
levels, sending goods only when stocks run low
 The decision to supply is taken by the supplier, not the
customer, as is the case traditionally.
 The supplier takes this decision based on the ability of the
current level of inventory to satisfy prevailing market
demand, whilst factoring in the lead time to resupply.

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Chapter 6 | 6.3 Overcoming poor coordination in retail supply chains
Vendor-managed inventory (VMI) (2)

 VMI depends on a sound business system and

electronic data interchange (EDI)
 Potential benefits for supplier
 Access data on customer sales;
 Access data on inventory levels at the customer.
 Potential problems
 Unwillingness to share data
 Seasonal products
 Investment and restructuring costs
 Retailer vulnerability
 Lack of standard procedures
 System maintenance

Vendor Managed Inventory - Clear Spider

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Chapter 6 | 6.3 Overcoming poor coordination in retail supply chains
Quick response (QR)

 “Quick response (QR) is an approach to meeting customer demand by supplying the right quantity, variety, and
quality at the right time to the right place at the right price.”
 This concept originated in the US textile and apparel industry in response to the threat posed by overseas
competitors
 The concepts behind QR are based on taking a total supply chain view of an industry and identify opportunities
for improvement
 involves mapping the processes needed to convert raw material into the final product
 performance of the process is also assessed to determine its effectiveness
 Role of enabling technologies
 Uniform product codes
 Electronic data interchange (EDI)

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Chapter 6 | Supply chain planning and control CASE STUDY
Case study: VMI

In groups of five
11. Would a vendor managed inventory be favorable in your case?
Which are the advantages and disadvantages involved?

Duration: 20 minutes

The Roles of Distributor in the Supply Chain – Push-pull Boundary | Semantic Scholar

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Chapter 6 | Supply chain planning and control
Chapter summary (1)

 How is material flow planned and controlled in the supply chain?

 Material planning and control in manufacturing is based on three time periods – long
term, medium term and short term.
 The focal firm ‘game plan’ comprises a set of inter-linked modules ranging from ‘front
end’ (demand management, resource planning, sales and operations planning and
master production scheduling) to ‘engine’ (materials and capacity planning) to ‘back end’
(detailed planning and control of source–make–deliver processes). All are linked to the
enterprise resource planning (ERP) database.
 After manufacture, replenishment of independent demand items in the supply chain is
usually managed by order-point methods like EOQ and POQ. Periodic review places
orders of variable size at fixed intervals.
 Retail processes have other, distinct challenges when it comes to material planning
and control. Stock must be available to generate sales, so OSA is a key performance
measure. Sales must be supported across a much wider range of SKUs. The top priority
of retailers has been to serve the market, and manufacturers traditionally have been
expected to serve retail processes. Shrinkage (stock losses) and the impact of promotions
are further challenges.

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Chapter 6 | Supply chain planning and control
Chapter summary (2)

 How is material flow planned and controlled in the supply chain? (continued)
 Coordinating material planning and control between firms greatly increases the need for
management of detail. There are many more ways to inhibit the accurate exchange of
data than within a focal firm. This results in undesirable symptoms like the bullwhip
effect and even chaotic behaviour of material movements.
 What is JIT, and how does it apply to logistics?
 JIT is a broad-based philosophy of doing the simple things right and gradually doing
them better. As applied to logistics, JIT can be conceived as a pyramid of key factors that
centre on minimum delay and minimum inventory.
 ‘How many’ and ‘when’ to order replenishment quantities are key questions that impact
on throughput times and inventories. JIT addresses these questions by attacking the
sources and causes of waste. Examples are reduction of changeover times and simple,
paperless systems of material control based on the principle of pull scheduling.
 Comparing MRP and JIT: JIT pull scheduling works best for control; MRP for planning.

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Chapter 6 | Supply chain planning and control
Chapter summary (3)

 How is it possible to improve coordination between retail and manufacturing

processes?
 Efficient consumer response (ECR) is aimed at integrating SCM with demand
management by means of category management, product replenishment and enabling
technologies.
 Collaborative planning, forecasting and replenishment (CPFR) aims to improve customer
service whilst inventory management is made more efficient.
 Vendor managed inventory (VMI) refers to the control of inventory management and
replenishment by the supplier. The key performance indicator is onshelf availability (OSA)
at the retailer.
 Quick response (QR) is based on taking a total supply chain view, starting with supply
chain mapping.

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Part Two | Chapter 7

Lean thinking and agile

supply chains

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