Strategic Decision Variables In Supply Chain

Management | Inventory | Transportation |

Facilities
By KS Rao Kunchala - June 3, 2017

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Strategic Decision Variables In Supply Chain Management | Inventory |

Location | Transportation | Facilities | Production

You Should Remember

Supply chain decision drivers represent the crucial parts of decision making in SCM, in which they in
due course produce the outcomes that impact supply chain performance.
Strategic Decision Variables In Supply Chain Management- Inventory, Transportation, Facilities and Production
 A Comprehensive Understanding of Supply Chain
Practices
• A supply chain is fundamentally defined as a set of three or more firms directly
connected by one or more of the upstream and downstream flows of products, services,
and Resources from a basis to a consumer.
• A very basic supply chain comprises of a business, supplier, and customer directly
associated by one or more of the upstream and downstream flows of products, services,
and Resources.
•  A comprehensive supply chain comprises of raw material providers of the immediate
supplier and customers of the immediate customer, all connected by one or more of the
upstream and downstream flows of products, services, and resources.
• An ultimate supply chain consists of all the businesses involved all the upstream and
downstream flows of products, services, and resources from the first supplier to the
ultimate customer.
• Supply chain management practice is a systemic as well as strategic direction of the
business functions.
• An effective supply chain practice always focuses on improving the long-term
performance of the business.

Supply Chain Management | Comprehensive Understanding  | Driven Factors Behind SCM

Popularity

Strategic Decision Variables In                          Supply

Chain Management                                                               

Supply chain decision drivers represent the crucial parts of decision making in SCM, in
which they in due course produce the outcomes that impact supply chain performance.

Therefore, they appear as the decision or design variables in

Accounting & Finance
the optimization models practiced in SCM decision making.
Entrepreneurship

Human Resources
 Leadership

marketing

Strategy

The key decision variables that contribute to the large extent in managing supply chain are
described in the following section.

Inventory and Location:

Corporations maintain inventory of raw materials, and finished goods to defend against
impulsive demand and undependable supply. Inventory is considered as one of the key
areas of supply chain costs.

Managing enormous inventories may increase supply chain costs but offer an advanced
level of customer service.

The core decision variables here are:

1. What products or goods to hold in inventory,

2. How much to order,
3. When to order; and
4. Where to hold inventory (locations).

Transportation:
Transportation in the nature of business is associated with the movement of items among
the supply chain phases- suppliers, plants, retailers.

Using faster transportation methods such as air and roadways may involve higher costs on
the other hand these methods will help in reducing delivery times in addition increasing
reliability.

The strategic decision variables at this stage are:

 1. Whether to outsource transportation implementation to third party logistics source.
2. What transportation methods are needed to practice ( road, air, sea etc.) for what
items or goods ( raw supplies or materials, and finished goods)
3. Distribution choices for finished goods (delivering products to customers directly or
through distribution networks)

Facilities:
Facilities such as plants and distribution points carry out a key role in handling supply chains.
The facilities are commonly regarded as strategic decisions and truly potential to directly
impact the performance of the supply chain.

The key decision variables underneath facilities are:

1. Quantity of plants and the localities of plants

2. Sizes or volumes of the plants and budget assigned to those plants
3. Amount of distribution centres and the locations of distribution centres
4. Distribution or supply approaches

Production:
What sorts of products or material are required to produce and which facilities are
demanded to control the bigger costs are considered to be the key influencing factors.
Clearly, longer cycle times can result larger costs (e.g., labour costs, inventory costs etc.)

The strategic decision variable at this stage is:

1. What sorts of products to be produced under which facilities.

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Facilities

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at different levels?

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Understanding 'What Niche
Variables
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Comprehensive Understanding | Overview | Features | Advantages Chains | Causes |
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