Effective management of a supply chain can be a competitive advantage Quizlet

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Local optimization
Members of the chain focus on maximizing local profit or minimizing immediate cost based on their limited knowledge

EXAMPLE:
For instance, a pasta distributor does not want to run out
of pasta for its retail customers; the natural response to an extra large order from the retailer is to compensate with an even larger order to the manufacturer on the assumption that retail
sales are picking up. Neither the distributor nor the manufacturer knows that the retailer had a
major one-time promotion that moved a lot of pasta. This is exactly the issue that complicated
the implementation of efficient distribution at the Italian pasta maker Barilla.

Incentives (sales incentives, quantity discounts, quotas, and promotions)
-Push merchandise into the chain prior to sale
-Generate fluctuations that are ultimately expensive to all members of the chain

Large lots
A logistics manager wants to ship large lots, preferably in full trucks, and a production
manager wants long production runs. Both actions drive down unit shipping and production
costs, but they increase holding costs and fail to reflect actual sales.

>Bullwhip Effect
- The bullwhip effect occurs as orders are relayed from retailers, to distributors, to wholesalers,
to manufacturers, with fluctuations increasing at each step in the sequence
-Stable demand becomes lumpy orders through the supply chain

Approaches taken by supply chain personnel to develop contractual relationships with suppliers.

Cost Based Price Model
-Supplier opens books to purchaser
-The contract price is based on:
>Time & Materials or
>A fixed cost with an escalation clause to accommodate changes in the vendor's labour& materials cost

Market Based Price Model
Price is based on published, auction, or indexed price
-Many commodities are priced this way: Agriculture products, Paper,
Metal

Competitive Bidding
-When suppliers are not willing to discuss costs
-Where near-perfect markets do not exist
>Used for infrequent work (e.g., construction, tooling, & dies)
>May take place via mail, fax, or an internet auction.
>Usually requires availability of several potential suppliers of the product (or its equivalent) and quotations from each

DISADVANTAGES:
>May make establishing long-term relationships between buyer and seller difficult
>Make the required communication & performance for engineering changes, quality, & delivery difficult

What is competitive advantage in supply chain management?

How will effective supply chain management affect competitive advantage?

How does supply chain management increase competitive advantage?

How effective logistics and supply chain management can provide a major source of competitive advantage?