Discuss the characteristics of a successful multi-echelon supply chain

Question

What will be an ideal response?

Answer 1

Answer: For such a multi-echelon distribution supply chain, a good replenishment policy has the following characteristics:
• All parties within a stage are divided into groups such that all parties within a group order simultaneously from the same supplier.
• When a party receives a replenishment order, the receipt should be synchronized with the shipment of a replenishment order to at least one of its customers. In other words, a portion of any replenishment order at a stage should be cross-docked onto the next stage.
• If a customer replenishes less frequently than its supplier, the supplier replenishment frequency should be an integer multiple of the customer replenishment frequency and replenishment at both stages should be synchronized to facilitate cross-docking. In other words, a supplier should cross-dock all orders from customers who reorder less frequently than the supplier himself.
• If a customer replenishes more frequently than its supplier, the customer's replenishment frequency should be an integer multiple of the supplier's replenishment frequency and replenishment at both stages should be synchronized to facilitate cross-docking. In other words, a supplier should cross-dock one out of every k shipments to a customer who orders more frequently than himself, where k is an integer.

The relative frequency of reordering will depend upon the setup cost, holding cost, and demand at different parties.

Replenishment orders in multi-echelon supply chains should be synchronized to keep cycle inventory and order costs low. In general, each stage should attempt to coordinate orders from customers who order less frequently and cross-dock all such orders. Some of the orders from customers that order more frequently should also be cross-docked.