Supply Chain

Chapter 11 · Strategic Information Systems

Lecture draft

From the content sections and aligned assignments.

Chapter learning objectives

  1. Map material, information, and financial relationships across a supply network.
  2. Explain how demand, sourcing, capacity, inventory, and lead time shape plans.
  3. Evaluate logistics and fulfillment choices using cost, service, and physical constraints.
  4. Analyze supplier dependence, traceability, disruption responses, and resilience.

Supply Chains

Chapter 11 · Supply Chain

Read: Supply Chains

Goals for this part

  • Explain Flows and Participants.
  • Explain Visibility and Integration.
  • Explain Information Across the Chain.

Flows and Participants

A supply chain is a network of organizations and activities that supports the movement and transformation of resources into an offering for customers. Participants can include suppliers, producers, transport providers, distributors, retailers, service providers, and customers. The network includes information and financial relationships as well as physical goods.

Flows and Participants

Upstream usually refers toward suppliers, and downstream toward customers relative to the focal organization. The terms depend on the viewpoint. A distributor is downstream from a producer and upstream from the stores it serves.

Flows and Participants

The grocery distributor needs information about orders, capacity, shipments, and receipts. Goods can be moving while information is delayed, or a record can show a shipment that has not actually left. Analysis should therefore distinguish the physical flow, information flow, and commitments among parties. The aim is to understand how they support the completed customer outcome.

Visibility and Integration

Visibility provides relevant knowledge about the state of resources and work. Integration connects activities and information so participants can coordinate. Visibility is useful only when the information is timely enough, its meaning is understood, and someone can act on it.

Visibility and Integration

A map showing every delivery vehicle may not reveal whether the shipment contains the needed item or whether it has passed a required inspection. Managers should specify the decision and then identify the information needed for it.

Visibility and Integration: comparison

Flow or state Information required Decision supported
Supplier commitment Quantity, date, and assumptions Prepare capacity and customer promises.
Goods in transit Actual shipment and expected arrival Adjust receiving and allocation plans.
Goods received Quantity and condition accepted Update usable inventory.
Customer demand Timing, quantities, and uncertainty Plan replenishment and service capacity.

Visibility and Integration

The table complements the application discussion in Chapter 9. Here the focus is the operational decision across the network, not which application stores the record.

Information Across the Chain

Partners may use different identifiers, time units, calendars, and definitions. A supplier may report cases while the distributor plans individual units. A store may report orders rather than customer purchases. Exchanging these values without their meanings can produce a coherent-looking but incorrect plan.

Information Across the Chain

Coordination needs agreed definitions, timing, permissions, and a way to handle disagreement. The distributor should know whether a supplier date is a forecast, an accepted commitment, or an actual shipment event. Those statements support different actions.

Information Across the Chain

Information sharing also has commercial and organizational limits. A partner may be unable or unwilling to disclose every cost or capacity detail. Managers need to identify the minimum information required for a useful decision and establish incentives for providing it accurately.

Information Across the Chain

Trust and verification can complement one another: a relationship can be cooperative while still using reconciled records and clear escalation when commitments change.

Information Across the Chain

Electronic data interchange (EDI) exchanges structured business documents under agreed formats, such as orders or shipment notices. It is one mechanism for partner coordination, alongside APIs and other services. Its value depends on the meanings, identifiers, and operating agreements behind the messages. A correctly formatted order in the wrong unit of measure can still create a supply problem.

Quick check

Name the concept that completes this statement.

A ________ is a network of organizations and activities that supports the movement and transformation of resources into an offering for customers.

Quick check

Name the concept that completes this statement.

________ usually refers toward suppliers, and downstream toward customers relative to the focal organization.

Your turn

Use the chapter case: A Food Supply Chain Faces a Disruption.

Map a supply network for a product or service, showing participants and physical, information, and financial relationships.

Prepare a brief explanation with a stated assumption and an outcome measure.

Recap

Follow physical, informational, and financial relationships together. Visibility supports coordination when records have shared meanings and connect to decisions that participants can actually make.

Planning

Chapter 11 · Supply Chain

Read: Planning

Goals for this part

  • Explain Demand and Forecasting.
  • Explain Sourcing, Production, and Inventory.
  • Explain Coordination and Information Quality.

Demand and Forecasting

Demand describes what customers want over a relevant period. Recorded sales are evidence about demand, but they may omit purchases that could not occur because stock was unavailable. A forecast based only on completed sales can therefore understate demand during repeated shortages.

Demand and Forecasting

A forecast estimates a future condition. Useful forecasts state the item, location, time horizon, and uncertainty relevant to the decision. A monthly forecast for the whole region may be insufficient for deciding tomorrow's delivery to one store.

Demand and Forecasting

Suppose a store sells 80 units but is out of stock for its busiest afternoon. Treating 80 as the complete demand observation can perpetuate the shortage. Managers should examine availability, promotions, changes in customers, and the cost of forecast errors.

Demand and Forecasting

A forecasting system supports planning by making these relationships visible; it does not turn a changing market into a certain schedule.

Sourcing, Production, and Inventory

Sourcing chooses and manages the suppliers needed for the offering. Production planning connects demand with the capacity and materials required to supply it. Inventory provides resources held for future use, including buffers against timing differences and uncertainty. These choices affect one another.

Sourcing, Production, and Inventory

A lead time is the elapsed time between a defined request and the relevant completion. A simple replenishment rule considers expected demand during lead time plus an additional buffer, often called safety stock. The appropriate buffer depends on uncertainty, service goals, costs, and the characteristics of the goods.

Sourcing, Production, and Inventory: comparison

Planning choice Benefit sought Cost or limit
More buffer stock Absorb variation and delay Funds, storage, and possible obsolescence.
Larger production batches Reduce some setup effort Less flexibility and more stock.
Another qualified supplier Reduce a specific dependence Qualification and coordination effort.

Sourcing, Production, and Inventory

The table explains why no single policy maximizes every objective. For perishable groceries, extra stock can reduce shortages while increasing waste. Managers need to evaluate the combined outcome.

Sourcing, Production, and Inventory

Procurement covers acquiring the goods and services the organization needs, including ordering and related controls. Demand planning combines forecasts, commercial knowledge, and constraints to prepare an agreed view for action. A demand plan differs from a forecast alone because it also reflects management choices and coordination.

Sourcing, Production, and Inventory

The distributor should preserve that distinction when a plan is used to commit resources.

Coordination and Information Quality

The bullwhip effect describes amplification of demand variation as orders move through a supply chain. Participants may respond to uncertain information, order in batches, react to promotions, or add their own buffers. A modest change in final customer activity can then produce a much larger change in upstream orders.

Coordination and Information Quality

Sharing more direct demand information can help, but it does not remove conflicting incentives or capacity constraints. If every participant is rewarded for keeping its own stock low, it may shift shortage risk to another participant. Coordination requires both information and workable agreements about how costs and service responsibilities are handled.

Coordination and Information Quality

The distributor can compare store sales, store orders, stockouts, and promotional plans before interpreting an order spike as a permanent increase in demand. It should also distinguish a forecast from a binding commitment. Data quality means that the plan reflects these meanings and timings, not only that the numbers add correctly.

Quick check

Name the concept that completes this statement.

________ describes what customers want over a relevant period.

Quick check

Name the concept that completes this statement.

A ________ estimates a future condition.

Your turn

Use the chapter case: A Food Supply Chain Faces a Disruption.

Analyze one coordination problem and compare two feasible planning or logistics responses.

Prepare a brief explanation with a stated assumption and an outcome measure.

Recap

Treat forecasts as conditional evidence and evaluate sourcing, production, and inventory together. Shared information helps when participants also agree on meanings, incentives, and responsibility.

Logistics

Chapter 11 · Supply Chain

Read: Logistics

Goals for this part

  • Explain Transportation and Warehousing.
  • Explain Distribution and Fulfillment.
  • Explain Returns and Service.

Transportation and Warehousing

Transportation moves goods between locations. Warehousing receives, stores, handles, and dispatches them. Decisions about routes, delivery frequency, storage locations, and handling requirements jointly affect cost and service. Optimizing one activity in isolation can move costs elsewhere.

Transportation and Warehousing

For example, consolidating deliveries may improve vehicle utilization while increasing the time stores wait for replenishment. Locating a warehouse farther from customers may reduce facility cost while increasing delivery effort. The appropriate choice depends on demand, goods, geography, and service needs.

Transportation and Warehousing

Information systems support those decisions through records of item locations, quantities, handling conditions, shipment plans, and actual events. A warehouse record needs to distinguish physical presence from goods available for picking. Items awaiting inspection may be present but unusable. A plan that ignores that distinction can create a shipment promise the warehouse cannot meet.

Transportation and Warehousing

Transportation management coordinates plans and execution for moving goods. Warehouse management coordinates receipt, storage locations, picking, and dispatch within the facility. Applications supporting these activities need to share relevant events, but the management responsibilities remain distinct. For example, assigning an efficient route cannot correct a warehouse's wrong item selection.

Distribution and Fulfillment

Distribution connects available resources with demand across locations. Fulfillment completes specific orders through allocation, picking, packing, dispatch, and handoff. The distributor must translate store requests into feasible work given its stock, equipment, labor, and transportation capacity.

Distribution and Fulfillment

An allocation decision determines which demand receives limited supply. During a shortage, filling orders strictly by arrival time may disadvantage a small store with infrequent ordering. Another rule might prioritize essential demand or an agreed service obligation. Managers should make the rule visible rather than allowing software defaults to become an unexamined policy.

Distribution and Fulfillment: comparison

Activity Required information Exception to handle
Allocate stock Demand, priorities, and usable quantities Supply cannot cover every request.
Pick and pack Item, location, quantity, and handling needs An item is missing or damaged.
Dispatch Destination, route, and capacity Delivery cannot meet the planned window.

Distribution and Fulfillment

The final column is part of the process design. A normal-flow plan is incomplete when routine exceptions have no owner.

Returns and Service

Reverse logistics coordinates goods and information moving back from customers or downstream partners. Returns may involve resale, repair, recycling, disposal, or investigation. Their consequences include inventory, finance, customer service, and sometimes supplier quality.

Returns and Service

If a store returns damaged goods, the distributor needs evidence of the item, quantity, condition, origin, and disposition. Receiving the goods should not automatically make them available for another shipment. The process also needs to communicate what credit or replacement, if any, has been authorized.

Returns and Service

Service measures should include reliability and condition as well as movement speed. A delivery that arrives on time with the wrong quantity has not fully met the promise. Managers can examine complete orders, damage, unresolved exceptions, and the time needed to correct a failure.

Returns and Service

Linking those measures to the underlying events helps identify whether the problem arises in picking, handling, transport, or communication.

Quick check

Name the concept that completes this statement.

________ moves goods between locations.

Quick check

Name the concept that completes this statement.

________ receives, stores, handles, and dispatches them.

Your turn

Use the chapter case: A Food Supply Chain Faces a Disruption.

Analyze one coordination problem and compare two feasible planning or logistics responses.

Prepare a brief explanation with a stated assumption and an outcome measure.

Recap

Logistics decisions connect physical constraints with information and service promises. Evaluate movement, storage, allocation, and returns as related parts of the completed order.

Risk

Chapter 11 · Supply Chain

Read: Risk

Goals for this part

  • Explain Disruption and Supplier Dependence.
  • Explain Quality and Traceability.
  • Explain Resilience and Recovery.

Disruption and Supplier Dependence

A disruption interferes with the expected flow of resources, work, or information. Causes can include capacity loss, transportation problems, information-service failures, or changes in a partner's circumstances. A risk analysis describes the scenario and consequences rather than treating all delays as the same event.

Disruption and Supplier Dependence

Supplier dependence arises when the organization relies on a source that is difficult to replace within the required time. Several contracted suppliers may still depend on one upstream facility, transport route, or digital service. Counting suppliers alone can therefore overstate diversification.

Disruption and Supplier Dependence

For the distributor, an alternative source is useful only if its goods meet requirements, the source has available capacity, and the logistics can support the change. Managers should investigate those conditions before recording “use another supplier” as a complete response. The analysis should identify the business activities affected and the decisions needed when the disruption occurs.

Disruption and Supplier Dependence

Vendor risk includes adverse consequences arising from a supplier or service-provider relationship. It can concern reliability, quality, information handling, financial or operating continuity, and dependence on further parties. The term should be translated into a specific scenario and consequence.

Disruption and Supplier Dependence

A generic “high-risk vendor” label does not explain which service could fail or what the organization could do about it.

Quality and Traceability

Traceability is the ability to connect an item or event with its relevant history and movement. It supports investigation of defects, reconciliation of transactions, and identification of affected goods. It requires meaningful identifiers and records that connect across participants.

Quality and Traceability

A distributor receiving a damaged batch needs to distinguish it from similar goods, identify where it went, and determine which records support the investigation. A product code may identify the type of item without identifying the particular batch. The level of traceability should follow the consequence and use.

Quality and Traceability: comparison

Information link Purpose Limit to examine
Supplier and batch Identify origin A supplier record may omit upstream sources.
Receipt and inspection Establish what was accepted Presence does not prove quality.
Shipment and destination Locate affected distribution Missing links can widen uncertainty.

Quality and Traceability

A digital trace is evidence, not automatic proof that an event occurred as recorded. Controls, independent checks, and partner agreements help establish its reliability.

Resilience and Recovery

Supply chain resilience concerns the ability to prepare for, absorb, respond to, and recover from disruptions. Responses can include buffers, qualified alternatives, flexible capacity, better information, and changes in the service offered. Each response has costs and limits.

Resilience and Recovery

The distributor may hold additional stock for an essential item, qualify another source, or agree on substitutions with stores. Extra stock can help with a short delay while doing little for a long interruption. An alternative source can help with supplier failure while remaining exposed to the same transportation bottleneck.

Resilience and Recovery

A scenario test examines whether the planned response is feasible under stated conditions. Managers can trace a two-week supplier interruption through stock, replenishment, customer commitments, and cash needs. They should identify triggers, owners, and recovery priorities, then revise the plan when the test exposes a dependency.

Resilience and Recovery

Resilience is a maintained capability rather than a claim that the network will never fail.

Quick check

Name the concept that completes this statement.

A ________ interferes with the expected flow of resources, work, or information.

Quick check

Name the concept that completes this statement.

________ arises when the organization relies on a source that is difficult to replace within the required time.

Your turn

Use the chapter case: A Food Supply Chain Faces a Disruption.

Map a supply network for a product or service, showing participants and physical, information, and financial relationships.

Prepare a brief explanation with a stated assumption and an outcome measure.

Recap

Trace dependencies beyond immediate partners, preserve useful evidence, and test whether alternatives and recovery arrangements can support essential outcomes.

Reading and assignments