Page 49 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes functions as a single entity. Supply chain synchronization is the ability to coordinate, organize
and manage end-to-end supply chain flows – including products, services, information and
financials – in such a way that the supply chain functions as a single entity. In other words, it is
a shared objective for supply chain members who are willing to work together to determine
how best to perform the overall activities and tasks that are required to meet customer demand.
With synchronized supply chains, the overall goal is the same as with traditional supply chain
management.
There are three key differences, however. One is that companies work with their vendors in
order to coordinate their processes and to achieve simultaneous production. Another difference
is that the Internet and other types of technology are incorporated into the process to make those
processes run smoother and more efficiently. Finally, the buying organization will need to hire,
train, and restructure their workforce in order to be able to accommodate this type of supply
chain management.

Synchronization enables companies to anticipate demand disruptions and anomalies in a timely
manner in order to mitigate the infamous bullwhip effect. It helps firms move to a demand-
driven environment that is better equipped to deal with uncertainty. Typically supply chain
managers handle uncertainty through buffering – i.e., it maintains pools of inventory at multiple
places in the supply chain. A synchronized supply chain operates by separating baseline demand
from demand surges and then using strategic points in the supply chain for the placement and
use of capacity and inventory.
Firms that aren’t synchronized often find that they have higher costs than firms and supply
chains that have some degree of synchronization in their supply chain. The higher costs can
result from inefficiencies in everything from manufacturing change orders to expedited
transportation costs. A cost that is not often known due to the lack of synchronization, however,
is the total cost due to excess inventory carried by supply chain members in an attempt to cover
their exposure to risk.

Simply recognizing that a firm is operating in a reactive mode does not guarantee that necessary
changes will be made. That is, firms will not necessarily make the needed investment in improving
synchronization unless organizational behaviour, management processes and technological
infrastructure issues are addressed. Changes to these areas will not happen unless management
is convinced that doing otherwise would be detrimental to the wellbeing of the firm. To achieve
the ideal state of synchronization, a firm must consider an even broader perspective. It is not just
what is good for the firm, but rather what is best for the many members of the entire supply
chain.

2.6.1 Performance Cycle Structure

The performance cycle represents the elements of work necessary to complete the logistics
related to market distribution, manufacturing, or support procurement. It consists of specific
work ranging from identification of requirements to product delivery. Because it integrates
various aspects of work, the performance cycle is the primary unit of analysis for logistical
synchronization. At a basic level, information and transportation must link all firms functioning
in a supply chain. The operational locations that are linked by information and transportation
are referred to as nodes. In addition to supply chain nodes and links, performance cycles involve
inventory assets. Inventory is measured in terms of the asset investment level allocated to
support operations at a node or while a product or material is in transit. Inventory committed to
supply chain nodes consists of base stock and safety stock. Base stock is inventory held at a node
and is typically one-half of the average shipment size received. Safety stock exists to protect
against variance in demand or operational lead time. It is at and between supply chain nodes

44 LOVELY PROFESSIONAL UNIVERSITY