Overview of Chapter 8 Section 2

This section details the challenges that can exist within supply chains.

Major symptoms of ineffective supply chains:
- Poor Customer Service
- High Inventory Cost
- Loss of Revenues
- Extra cost of Expediting Shipments

The problems along the supply chain stem mainly from two sources: (1) from uncertainties and (2) from the need to coordinate several activities, internal units, and business partners.
- External, Uncontrollable factors that influence Actual Demand: Competition, Prices, Weather Conditions, Technological Developments, and Customers General Confidence.
- Other Supply Chain Uncertainties: Delivery Times & Quality Problems
- Bullwhip Effect – the erratic changes in orders (along the) supply chain.

Trust is a vitally important in a collaboration relationship between suppliers and buyers in the supply chain. Trust involves a calculated process wherein an organization estimates the costs and/or the rewards of another party cheating or staying in the relationship.
- Factors leading to a trusting behavior in supplier-buyer relationship: Information sharing, Prediction process, Perception of mutually sharing both the risks and the benefits of collaboration, Parties ability to meet obligations.
- Trust, Risk Perception, and Relationship commitment ultimately affect whether an organization continues in a cooperative electronic relationship.

The development of an international supply chain strategy must include political concerns, currency risk, governmental concerns, production quality, and infrastructure issues.

Outsourcing – the transfer of some of the organizations internal processes and resources to outside vendors, outsourcing decisions involve complex legal contracts, payment schedules, and service-level agreements.
- Activities that are outsourced are usually not part of the core competencies of an organizations

Having many suppliers usually decreases risks and increases cost

Vendor Selection Process
- Stage 1 – Vendor Evaluation
- Stage 2 – Vendor Development
- Stage 3 – Vendor Negotiation

Reverse Logistics – is the process of continuously taking back products and/or packaging materials to avoid waste.