Tiering supply chain

In attempting to analyze supply chain exceptions, our analysis here is based on a simple two-tier supply chain stmcture where the customer demand is directly fulfilled by a manufacturer, who in turn is supplied various components by a set of suppliers. Logistics service providers handle material movements between all the parties as shovm in Fig. 2. 

Since 1994, the automotive industry in the USA and Europe has been operating quality system certification schemes that extended the requirements of ISO 9001, ISO 10011, and EN 45012. One of these schemes was addressed by my QS-9000 Quality S /stems Handbook, published in 1996. In the same year the automakers of the USA and Europe formed the International Automotive Task Force (lATF) which, in cooperation with the technical committee of the International Organization of Standardization (TO 176), produced ISO/TS 16949. Use of and registration to this new standard is currently voluntary. It is intended that following the first revision to incorporate ISO 9000 2000, the ISO/TS 16949 certification scheme will be mandated by all major vehicle manufacturers on their Tier 1 suppliers. As a result, the standard will be cascaded along the supply chain, ultimately reaching all suppliers to the global automotive industry. 

Demand/supply chain improvement in multi-tier environments... 

The horizontal structure refers to the number of tiers across the supply chtiin. The supply chain may be long, with numerous tiers, or short, with few tiers. The vertictil structure refers to the number of suppliers/customers represented within each tier. A company can have a nturow vertical structure, with few companies at each tier level, or a wide vertical structure with many suppliers and/or... 

Supply chains that burst to many tier 1 customers/suppliers will strain corporate resources and limit the number of process links the focal company can integrate and closely manage beyond tier 1. In general, managers in companies with immediately wide vertical structures actively manage only a few tier 2 customers or suppliers. Some companies have transferred servicing small customers to distributors, thus moving the small customers farther down in the supply chain from the focal company. This principle, known as functional spin-off, is described in the channels literature (Stem et al. 1996) and can be applied to the focal company s network of suppliers as well as to its customers. 

An assembly structure is one in which products from separate suppliers or plants are combined to form subassemblies, which in turn are combined to form the final assembly. Figure 2.1 shows a sample assembly supply chain. Automobile industry manufacturers, such as Toyota, Honda, and Ford, all use tiered purchasing arrangements, in which subassemblies from one set of suppliers are combined at the next level until the final car assembly, thus generating an assembly structure of suppliers. In such structures, the complete kit of parts from all suppliers is necessary to complete assembly. Thus, a key task for the operation of an assembly structure is coordinating the deliveries from all suppliers to produce a unit of a finished product. 

The information provided is assembled based on the CEFIC template for dialogue between DU and suppliers created as part of the REACH Guidance on the development and supply-chain communication in ES. The ETRMA document is designed to facilitate specific ES development. However, an emphasis has been placed the information required for a Tier-1 analysis to develop broad ES inclusive of all facilities. 

The other collaboration task is Performance Assessment which calculates important metrics in order to discover trends, develop other strategies, and assess the attainment of business goals. The retailer task here is Supplier Scorecard, and the manufacturer task is Customer Scorecard. The model described above is a two-tiered model. However, this model can be extended to include more than two layers in the supply chain. VICS calls this N-tier Collaboration, which is a relationship that develops from retailers through manufacturers/distributors to suppliers. 

Many major retailers and large manufacturers have reduced their operating costs through their use of supply chain management techniques. But, there has been little effect on the price of the item to the consumer. Some argue that this occurred because the total amount of inventory in the supply chain was not reduced. Instead, the inventory may have been transferred to the second and third tier suppliers, but not eliminated from the supply chain. 

This scenario occurs in the real world every day. In an effort to avoid poor customer service, elements of supply chains do exactly the same thing. Ironically, the result of these actions is even worse customer service. The actual fluctuation in monthly demand in the automotive industry, for example, is less than 10%. However, second and third tier suppliers are constantly adjusting capacities by as much as 50%. In the textile and apparel industries, the effect of seasonal fluctuations only compounds the same problems. 

Variation in the supply chain can happen anywhere — in distribution channels, at major manufacturers, or at any supplier tier. Variation anywhere will spread to trading partners all along the chain. The supply chain manager s job will increasingly focus on early identification of variation with the goal of eliminating it. 

Supply chain management in production operations for new products tends to be rather binary information flows backward from the customer and products flow forward from the digging it out of the ground suppliers, through various tiers of transformation until it arrives to satisly the customer need. Maintenance, repair, and overhaul (MRO) operations are different. This case study covers the supply chain issues of a multinational... 

Detectability is defined as the time it takes for the buyer to realize that a disruption to supply network has occurred. Modeling the propagation of disruption information in a supply chain depends on the way nodes communicate with one another. Under the best-case scenario, each supplier, independent of its tier, communicates directly with the buyer. This is a very optimistic scenario since it requires every supplier to know the end destination of its product and to establish a direct connection with the buyer. The next best scenario assumes that every disrupted supplier reports to its immediate buyer. This situation is more realistic however, it does not ensure that the information will reach the primary buyer promptly since the immediate buyer of the disrupted supplier may not share the information with his customers or with the main buyer. Another scenario would be to assume that the information flows randomly in the supply chain network. This scenario may be perceived as pessimistic at first, but the method can be customized to better model the reality. 

There are several ways to include detectability of disruption risks in supply chain risk models. One way is to directly use the values in the MFPT matrix, the ntij values, and create an objective function to minimize the number of transitions between suppliers and the buyer. Otherwise, the MFPT values may not be suitable to use directly in risk quantification since values in the MFPT matrix are in transitions and need to be transformed to actual time units (e.g., hours, days, or weeks) for proper use in disruption quantification. This transformation to time units is supply chain specific, since the speed with which the information spreads through the nodes depends on the information technology systems implemented at each node and the availability and strength of connection among the nodes. For instance, if a buyer has implemented an ERP system that allows communication with all tiers of his supply chain, he would have much better connectivity to any supplier and the transition times would be much shorter than buyers that do not have a similar visibility. We call the time it takes any disruption news to reach from node i to j as the disruption delay between nodes i and j and denote it as Aij. 

Consider a small supply chain with three stages, a buyer, three tier-1 suppliers and five tier 2 suppliers as shown in Figure 7.11. Assume that the buyer wants to select a single supplier and that all tier-1 and their tier-2 suppliers have enough capacity to meet the buyer s demand. 

Process design. This is a significant supply chain management problem because of the very large number of processes that can be potentially enumerated as the supply chain is functionally decomposed top-down from a tier unit function process level, and then need to be properly managed. One of the key problems that arise is how to develop a composite process design of the supply chain that clusters these processes based on similarities in features and... 

Analysis of these factors/activities involves dealing with a wide range of managerial problems and spans across all tiers of the supply chain. Problem-solving approaches need to consider both interactions among factors and activities, and supply chain members. 

The supply chain is usually divided into tiers (or stages, or echelons). Each tier consists of units with the same general functionality. The concept of tier should be treated with care, however, as differentiation between tiers is often fuzzy and units can belong to multiple tiers. That has become even more profound as supply chains assume networked structures. Still, tiers help structure the supply chain configuration problem and facilitate identification of common features of supply chain units. The typical supply chain tiers, which can be further decomposed, are... 

Demand for supply chain products or services originate at the customer tier and it is transmitted upstream along the supply chain (Fig. 2.2). In many cases, customer nodes in this tier are an aggregation of individual customers clustering in a particular geographical location. 

The distribution tier receives customer requirements and is responsible for delivering required products or services. It involves such general units as warehouses, distribution centers, and cross-docking points. These units are grouped into distribution sub-tiers. Alternatively, supply chain units in the distribution tier can be classified as wholesalers, retailers, and brokers. Third-party logistics providers present a special case for belonging to the distribution tier. In some situations, these can be represented by a single supply chain node. 

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