Traditional supply chain

Summarizing, demand is not a given input quantity to be fulfilled in the traditional supply chain management sense but is defined more differentiated as a mix of fixed contract demand to be supplied and spot demand providing company a degree of freedom in making active sales target decisions. 

Pharmacies purchase their medication inventories through traditional supply chains that include drug wholesalers and manufacturers. Third parties or PBMs do not purchase medications in the traditional sense of physical ownership. Instead, they authorize payment for medications and related pharmaceutical services as part of the claim processing function. 

To prepare the base model, we have considered a traditional supply chain with linear stmcrnre, which consists of five main levels Consumer, Shop Retailer, Retailer, Wholesaler and Factory. Figure 1 shows the graphical representation of the levels, indicating the materials flow, which occurs firom the top of the chain (Factory) to the lower levels (Consumer). Therefore, it is called downstream flow. The information flow is considered to be in the opposite way, which is called downstream flow. 

The Internet along with Y2K was the perfect accelerant. The two forces intertwined to reshape and transform both business-to-consumer and business-to-business relationships. The most profound effect was in retail. As shown in Table 1.1, the Internet sparked a new channel that outpaced the growth in traditional store formats. While the uninformed might conclude that the growth of e-commerce made bricks obsolete, in reality, the opposite was true. Successful companies transformed their traditional supply chains to meet the new requirements of this growth channel. It required new bricks, new processes, and a business transformation. 

The change in demand forecasting processes is a major change management hnrdle for the traditional supply chain. The shift from a focus on history to a focus on market drivers, or to align on demand assumptions versus debating nnmbers, is a cnltural redefinition. 

To be effective at market sensing, companies have to build strong horizontal processes to connect downstream and upstream data. Traditionally, supply chain processes have evolved from vertical processes. These functional silos—source, make, and deliver—gave birth to supply chain management. However, this silo approach, and a focus on vertical excellence, is both a barrier and an enabler to maximize value and build strong networks. It is a conundrum. Companies need to build strong vertical silos to deliver operational excellence but at some point in their maturity, they must "break the glass" and shift their focus to build horizontal excellence. 

In 2004, Scotts Miracle-Gro faced a crisis. Retailers were unhappy, sales were lagging, and on-shelf availability was an issue. Because of demand volatility (a combination of season, climate, weather, consumer preference and competifive behavior), Scotts traditional supply chain systems were just not up to the task of delivering the right product at the right time at the right place. The lack of supply chain reliability had become a major issue in their three major retail relationships Home Depot, Lowe s, and Walmart. This was significant. These three relationships represented more than 80 percent of the company s channel volume. 

Organization. The use of downstream or channel data also depends on the organization having the right combination of inspiration (vision), perspiration, and iimovation. ft is not as simple as stuffing downstream data into traditional supply chain technologies. 

Traditional supply chains are operationally disconnected and reactive to demand. Demand volatility and operational complexity require supply chains to become more resilient. Market-driven value networks begin with conscious choices that integrate and synchronize supply with demand channels and product portfolios. 

Quadrant n. In this scenario, volume is high and demand error is low. This is the easiest manufacturing process within the supply chain to manage through traditional supply chain practices. It is the perfect scenario to apply Lean process thinking. 

New forms of unstructured data are growing that enable quicker insights and less data latency. Traditional supply chain processes were based only on structured data. 

Big data supply chains and their impact on business will redefine supply chain applications, ft vdll enable sensing and predictive analytics that were previously only dreamed of by the early supply chain pioneers, ft will make traditional supply chain technologies obsolete, or legacy, applications. 

Bowersox and Lahowchich (2008) describe that traditional supply chains have... 

In the traditional supply chain model, the raw material suppliers are at one end of the supply chain. They are connected to manufacturers and distributors, which are in turn connected to a retailer and the end customer. Although the customer is the source ofthe profits, they are only part of the equation in this push model (E-Future, 2006). The order and promotion process— which involves customers, retailers, distributors, and manufacturers—occurs through time -consuming paperwork. By the time customers needs are filtered through the agendas ofallthe members ofthe supply chain, the production cycle ends up serving suppliers every bit as much as customers. 

At the first stage — typical traditional supply chains — Chains 1 through... 

To the best of our knowledge, this chapter represents the first formal model of a drop-shipping supply chain, the practice where the retailer acquires customers while the wholesaler is responsible for fulfillment and takes inventory risk. We compare traditional supply chain structures in which the retailer both takes inventory risk and acquires customers with supply chain structures employing drop-shipping agreements. Our focus is on the supply chains in which both the retailer and the wholesaler are present. We concentrate on two cost... 

Finally, we will illustrate the coordinating contracts. Assume that c = 5, r = 8, and A = 1. We denote profits for the retailer and the wholesaler resulting from the coordinating contract by and correspondingly. As we noted before, a returns contract for the traditional supply chain and a penalty contract for the drop-shipping models splits profits in the same proportions. Figure 14.7 presents retailer s and wholesaler s profits with and without coordination for all models. 

We find simple contracts that achieve coordination in both the traditional supply chain and the supply chain with drop-shipping. According to these contracts, in the traditional channel the wholesaler subsidizes a portion of customer acquisition expenses as well as compensates the retailer for inventory carried over. In the case of drop-shipping inventory compensation goes from the retailer to the wholesaler. If the wholesaler can choose the wholesale price, the proportion of the customer acquisition expenses to subsidize, and the inventory compensation, an arbitrary split of profits can be achieved. In any case, the proportion of profits that the wholesaler captures coincides with the proportion of customer acquisition costs she subsidizes. Therefore, the higher the subsidy, the higher the wholesale price and the higher the wholesaler s profits. 

Physical supply chain units— traditional supply chain units located at certain physical locations and processing physical materials and products... 

The supply chain unit selection in cloud chains is affected by a number of different factors than used in traditional supply chain configuration. These factors are related to the Quality of Service (QoS) criteria used in web service selection (Strunk 2010). They include service response time, service availability and service reliability. It is expected that physical supply chain configuration decisions and virtual/information processing supply chain configuration decisions are mutually interdependent. Therefore, the cloud chain configuration includes joint selection of all kinds of supply chains units according to their respective selection criteria. 

As shown in Figure 1.1, the traditional supply chain was concerned with a linear flow of information and products/services from customers to suppliers... 

The traditional supply chain Starts with assets core competencies ... 

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