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Global Supply Chain Issues

Process issues occur for many reasons, a number of which are influenced by the complexity of geographical dispersed locations and participants. Table 13.10 lists common global supply chain issues with their description. Poor line-item availability causes unfulfilled orders, higher transaction costs, and lower customer satisfaction. A line item is a product, component, material, or an associated service having a quantity. An order consists of one or more line items. If customer orders do not have all their line items in the right quantity and defect-free, then order fulfillment is less than 100%. A backorder is created when a line item is not shipped as part of an original order. This requires another shipment at a later time, increasing order handling and shipment costs. There are several reasons for backorders. Customer complaints occur if an order does not arrive on time and as promised.

Schedule changes occur if products or services are not ordered within their standard lead times, if orders are displaced from an established schedule, or if other causes interrupt production and fulfillment. This causes expediting of processes and degradation of operational efficiency. Although schedule changes can occur because of unforeseen circumstances, chronic rescheduling should be investigated and the root causes eliminated. Typical reasons for overtime include unplanned orders, schedule changes, and poor process yields, among other reasons. High inventory levels occur because of low inventory turnover causing higher inventory carrying costs which impacts investment. Low inventory turnover causes include long lead times, inaccurate forecasting, or other issues. Low cash flow is caused by long order-to-cash lead times and the causes of them such as quality issues, internal billing errors, customer payment policies,

TABLE 13.10

Global Supply Chain Issues

Issue

Description

1. Poor Line Item Availability

A “line" is one product and its associated quantity'. An order can consist of one or more-Кпе items. When product is not available to fill customer orders the line item availability' is less than 100%.

2. Backorders

A backorder is created when a product is not shipped to a customer as part of the original order or a service is not provided. This situation requires the product be shipped later resulting in incremental handling and shipment costs.

3. Customer Complaints

Customer complaints occur if 100% of an order does not arrive on-time, defect free and at the agreed upon cost.

4. Schedule Changes

Schedules for products or services should not be changed within their lead time unless circumstances have changed since materials have been ordered and system capacity has been reserved to produce the product or service. Although schedule changes occur, and external causes eliminated from the process.

5. Unplanned Overtime

Chronic problems causing unplanned overtime expenses should be investigated and their causes eliminated from the process. Typical reasons include unplanned orders, schedule changes and poor process yields.

6. Unplanned inventory' Carrying Costs

High inventory carrying costs should be investigated and their causes eliminated. The causes are either related to demand or lead time management e.g. large lot size and poor quality increase lead time and required safety' stock or capacity.

7. Low Cash Flow

Low cash flow is caused by long order to cash lead times. Reasons include quality' issues, internal billing errors and customer payment policies and other issues.

8. High Product Transfer Costs and Premium Freight

When materials or information are moved unnecessarily and especially' between locations lead time and costs increases requiring more inventory or capacity.

9. Low Inventory Turns, Excess and Obsolete Inventory

Low inventory' turns are caused by high levels of current inventory as well as excess and legacy obsolete inventory. High inventory or any type is caused by poor demand estimation and long lead times.

10. Damaged Product

Product can be damaged because of poor packaging, poor handling, environmental conditions and many other reasons. Chronic damage problems should be investigated, and their internal and external causes eliminated.

and other issues. Incremental transaction costs related to labor and transportation increase if materials or information are moved unnecessarily across a supply chain. Sometimes this may be needed from a strategic perspective when people, equipment, or materials are at either a central or decentralized location. Low inventory turnover is also caused by high levels of E&O inventory. Obsolete inventory is caused when it is no longer in demand because of design changes, changes in customer preferences, or demand was low. Materials can also be damaged, and information can be lost or corrupted because of poor packaging, poor handling, or environmental conditions. Chronic damage problems should be investigated and their root causes eliminated.

 
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