Supply chain cheat sheet
Flows, lead times and inventory models.
Supply-chain flows
A supply chain coordinates material, information and financial flows between connected organisations and activities.
A delayed information flow can disrupt a physical delivery plan.
Lead time
Lead time measures elapsed time between defined start and finish events. Specify the process boundary before comparing values.
Order-to-delivery time differs from the time spent physically processing an item.
Little’s law
For a stable process with compatible long-run averages, work in progress equals throughput rate multiplied by flow time.
10 units/hour × 2 hours = 20 units of average work in progress.
Reorder point
A basic reorder-point model covers expected demand during replenishment lead time, with an additional buffer when the model includes one.
Reorder point = demand rate × lead time + safety stock.
Inventory position
Inventory position combines on-hand stock, outstanding orders and unmet demand. It differs from the quantity physically available on a shelf.
A common model is inventory position = on hand + on order − backorders.
Safety stock
Safety stock buffers uncertainty in demand or replenishment. Its appropriate level depends on the variability, service objective and costs in the chosen model.
A buffer is not a guarantee that every possible demand surge will be covered.
The bullwhip effect
Demand variation can be amplified upstream through ordering practices, forecasting and delayed information. Shared information and smaller, more frequent adjustments can change that behaviour.
Retail demand and a manufacturer’s order stream can have different variability.
Bottlenecks
A bottleneck limits a process’s achievable throughput under the stated conditions. Adding capacity elsewhere may not improve the whole system’s output.
Compare capacities in a common time unit and account for downtime and rework.
Worked example: inventory position
A site has 120 units on hand, 80 on order and 30 backordered. Its model inventory position is 120 + 80 − 30 = 170 units, while physical on-hand stock is still 120.
Do not count an outstanding order as stock already available for immediate use.
Common mistake: faster at one step means faster overall
Local improvements can create queues or move the constraint. Measure end-to-end lead time and completed output rather than only one activity’s speed.
A process can have high utilisation and still have long waiting times.
Check your understanding
Under Little’s law, what is average time if average work in progress is 50 units and throughput is 10 units/hour?
5 hours, assuming the long-run conditions and system boundary make Little’s law applicable.
Curriculum connections
Australia
Economics and Business / state senior subjects
process capacity · inventory and lead time · system-wide performance
Senior courses and assessment requirements are set by state and territory authorities.
ACARA · Humanities and Social SciencesJapan
ビジネス基礎・商業
process capacity · inventory and lead time · system-wide performance
MEXT course connections include optional and specialist subjects; the cards are original revision notes.
MEXT · 商業United States
Business education / introductory business
process capacity · inventory and lead time · system-wide performance
Courses vary by state and school. Common Core, NGSS, CSTA, ACTFL and AP are frameworks or pathways, not one federal curriculum.
US Department of Education · State and local responsibility OpenStax · Introduction to BusinessUnited Kingdom
GCSE / A level Business — England
process capacity · inventory and lead time · system-wide performance
England uses the GCSE/A level labels shown here. Scotland, Wales and Northern Ireland have their own curricula and qualifications.
DfE · GCSE subject content (England) DfE · AS and A level subject content (England)