EXAMPLES OF SUPPLY CHAINS
In this section, we consider several supply chains and raise questions that would have to be answered during the design, planning, and operations phases of these supply chains. In later lessons, we discuss concepts and present methodologies that can be used to answer these questions.
Example 1.1 Micron Electronics Inc.: A Direct SalesManufacturer
Micron Electronics Inc. is a manufacturer of PCs that sells directly to customers who place orders either through the telephone or the Internet. Micron has one assembly facility, located in Idaho. It also has a subcontractor that is able to assemble the most popular models. A typical customer order comes in via the Internet or a toll-free number. Depending on the type of order(individual or corporate; high-volume or low-volume item), it is allocated either to the Idaho facility or the subcontractor. Large corporate orders, for example, are handled out of Idaho. Micron carries almost no finished-goods inventory and assembles PCs in response to customer orders.
A typical order may include a monitor and a printer in addition to the PC. Micron does not manufacture peripheralssuch as monitors and printers. They are stored in Memphis at a depot that Federal Express (FedEx) operates for Micron with some peripherals also held at the Idaho facility. Thus, the order taker must allocate product to the peripheral order from items in the depot. For an individual order, FedEx transports the assembled PC (either from Idaho on the subcontractor) to Memphis, where it is mergedwith the peripherals from the depot. Another possibility is for FedEx to do the merge at a station close to the customer site. For example, an order from Chicago can be merged in Chicago itself. The merged order is then delivered to the customer. To facilitate this in-transit merge, Micron shares detailed electronic information with the FedEx warehouse as PCs ship out of Idaho. Customers can trackthe status of their orders after they have placed them.
For large corporate orders within the United States, Micron does not use FedEx. It uses less-than-truckload (LTL) companies to move the product. Currently, these orders are filled using peripherals that are stocked in Idaho. Micron outsources both PC components and peripherals throughout the world.
The company uses airfreight as well asocean transport to move product to the United States, and then a combination of truck and rail to move it into warehouses. The following supply chain design, planning, and operational decisions have a bearing on the performance of the Micron supply chain:
1. Why has assembly of certain PCs been outsourced? What characterizes PCs on orders that have been outsourced?
2. Why does Micronhave only one manufacturing site?
3. Why are individual orders shipped using FedEx and large corporate orders shipped using LTL?
4. Why are individual orders merged in transit rather than at the assembly site itself?
5. How much inventory of components and finished products is maintained? What inventory policies are used to manage replenishment?
6. Why are some componentsbrought by airfreight and others by ocean? On what basis is the transportation mode selected for a shipment?
Answers to these questions determine the appropriateness of the design, planning, and operation of the supply chain. Manufacturers that sell both direct and through resellers, like Hewlett Packard and Compaq, will need a different supply chain design to best support their strategy. Howshould they design and manage their supply chains?
Example 1.2 7-Eleven: A Convenience Store
With more than 17,000 stores in more than 20 countries, 7-Eleven is one of the largest convenience store chains in the world. It has more than 7,000 stores in Japan and almost 5,000 in the United States. Its growth in Japan has been phenomenal, given that the first 7-Eleven stone opened in Japan in...