Supply chain product costs, paths

But what could be done to improve the supply chain The manufacturer studied the source of the costs and decided that the problem was the one-size-fits-all approach implied by the original supply chain. Because all products followed the same path in going from the manufacturer to the customer, the associated supply was not matched to demand patterns. 

Another path proceeds up the vertical axis in Figure 27.1, then across. Supply chain partners lay out rules for cost sharing before any move to implement the policies. This situation is most likely to occur in the case of cooperating, co-equal companies in the supply chain. A jointly developed product requiring considerable investment by each partner is an example. 

The benchmark case is of greater stand-alone interest when the network exhibits complexities such as stochastic demand that is filtered through the inventory policies implemented at the successive echelons, intricate cost structures, lead times, and multiple time periods of activity. This is the theme of the bulk of multi-echelon inventory theory, dating back to the serial supply chain analysis of Clark and Scarf (1960). This literature also considers system architectures that move product from a manufacturer to end customers along, multiple parallel paths, such as a 1-depot N-warehouse network. 

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