Compare and contrast efficient versus responsive supply chains
What will be an ideal response?
The purpose of efficient supply chains is to coordinate the flow of materials and services to minimize inventories and maximize the efficiency of the manufacturers and service providers in the chain. Responsive supply chains are designed to react quickly to market demands by positioning inventory and capacities to hedge against uncertainties in demand. Efficient supply chains work best where demand is predictable with low forecast errors; competitive priorities are low cost, consistent quality, and delivered on time; new-product introduction is low; and profit margins are low. Responsive supply chains work best when demand is unpredictable with high forecast errors. Competitive priorities are development speed, fast delivery times, customization, high-performance design quality; new product-introduction is frequent; contribution margins are high; and product variety is high. Efficient supply chains should use a make-to-stock or standardized services operations strategy, low-capacity cushion, and low inventory investment. They should shorten lead time without increasing costs and emphasize fast delivery time, customization, volume flexibility, and high-performance design quality. Responsive supply chains should use assemble-to-order, make-to-order, or customized services emphasizing product or service variety; high-capacity cushions; and inventory levels set to enable fast delivery time. They should aggressively shorten lead time and emphasize fast delivery time, customization, volume flexibility, and high-performance design quality.
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