Uncertainty in Supply Chain

Gupta A, Maranas CD (2003) Managing demand uncertainty in supply chain planning. Computers Chemical Engineering 27 (8-9) 1219-1227... 

It is not unusual for the actual shipment date to be a few days different from the original promised shipment date due to uncertainty in supply chain processes. However, this unreliability might not be acceptable to relationship-based customers. Therefore, Dell offers a special service through Dell Premier accounts at premier.dell.com for business and public sector customers. The service not only provides reports and tools to assist purchasing, asset management, and product support, but also allows customers to hook up their ERP/EDI systems with Dell s to perform real-time computer systems procurement. Through Premier accounts, Dell commits to more responsive and reliable order promising and fulfillment solutions for its relationship-based customers with support from advanced IT systems (see Kraemer and Dedrick 2001). 

Modelling of uncertainties in supply chains has become important with the proliferation of product varieties and the increased volatility of the global market places of the contemporary business environment. For instance, product range and product style in a fashion industry are renewed constandy while in the basic apparel industry, long production and distribution lead times still prevail. Managing business environment dynamics in an uncertain and competitive market is a challenging task and forced many organizations to reform their operational processes. 

Uncertainties, wherever they originate, may affect other supply chain partners. In Chapter 7, we develop the case for managing uncertainty in supply chains under the theme of agility. 

These dimensions were also resonated by Cavinato (2004) when identifying risks and uncertainties in supply chains, focussing on five sub-chains/networks for every supply chain ... 

R6 - Price uncertainty consideration in planning Spot demand quantity and prices are uncertain in commodity business specifically in the considered planning horizon of 3-12 months. Since price is the main buying criterion in commodity business, mid-term demand quantity is mainly influenced by the price level. If spot demand quantity and prices depend on each other, uncertainty can be limited to one parameter while the other parameter is kept constant. The spot demand price is considered as uncertain in this problem leading to different turnover scenarios for the same sales quantity. Lababidi et al. (2004) presenting a petrochemical case that had to consider uncertainty in market prices and raw material costs in supply chain optimization. 

From this point of view, one of the most important tasks of supply chain management is to minimize, sometimes to avoid adverse effects caused by uncertainty in a supply chain to ensure the regularity of material flow, enhance flexibility as well as certainty, and reduce costs. To achieve those goals, optimizing the supply chain program plays a profound role in supply chain management. 

The flexible supply chain strategy addresses uncertainties associated with supply chain operations and primarily demand uncertainty. The flexibility is an ability in a relatively inexpensive way to respond to changes in customer demand and shift production and delivery to products with the highest demand and value. This ability usually is aheady built-in in the system, therefore, supply chain already should be designed to provide a certain level of flexibility. This characteristic limits a kind of changes and level of uncertainty the supply chain is able to react, and designing flexible systems usually is more expensive than designing lean systems. 

From the supply chain network perspective, flexible supply chains have built-in redundancies and cushions in the form of extra units and links to deal with changes and uncertainties. The supply chain units and links are less specialized and multiple functions can be performed. It is argued that the flexible supply chain strategy attempts to deal with uncertainty without drastic overhaul of the supply chain network. 

The screening tests during indirect reasoning showed the considerable importance of social capital in undertaking initiatives in supply chain management. The companies researched indicated that the lack of trust and commitment of collaborators in the supply chain and ensuing restrictions in access to data, as well as the growing uncertainty of business operations were a major barrier to the implementation of actions towards improvement. 

A Combined Grey System Theory and Uncertainty Theory-Based Approach for Supplier Selection in Supply Chain Management. 461... 

Material flow risks Many examples of natural disasters such as labour strikes and fires have brought an end to supply of material. In supply chain material flow, demand fluctuations and supply dismptions are two types of primary uncertainties which involve issues as single sourcing risk, sourcing flexibility risk, supplier selection/outsourcing, supply product monitoring/quality and supply capacity. 

Zhou, X. 2009. An incentive model of information sharing in supply chain with demand uncertainty. Eighth Wuhan International Conference on E-business, 1, 2926-2932. 

The implication of uncertainty for supply chain processes is that they need to be flexible. Flexibility is dehned as the ability to react or transform [supply chain processes] with minimum penalties in time, cost and performance (Upton, 1995). Flexibility comes in two basic forms (Sawhney, 2006) ... 

As discussed in Chapter 11, double marginalization reduces supply chain profits because the supply chain margin is divided between the two parties, and each stage makes its decisions considering only its own margin. We now discuss several other instances in which double marginalization leads to a loss in supply chain performance in the presence of demand uncertainty. 

Several simulation-based optimization models in the context of supply chain management can be found e.g. in the area of supply chain network optimization (Preusser et al. 2005) or to simulate rescheduling of production facing demand uncertainty or unplanned shut-downs (Tang/Grubbstrom 2002 Neuhaus/Giinther 2006). A basic approach of simulation-based optimization is presented by Preusser et al. 2005, p. 98 illustrated in fig. 24. 

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