The paper "Gate Gourmet Supply Chain Management" is a wonderful example of an assignment on management. The challenges Gate Gourmet faces because of demand fluctuations from the airlines it serves can be summed up with one word: “ variability” . As the case study pointed out, there is a limit to how much can be planned ahead of demand; extra passengers or last-minute changes (such as meals for special diets) can add complications when time available to completely service customers is already extremely limited. Frei (2006, pp. 3-4) lists five different types of customer variability, of which two – arrival variability and request variability – apply to Gate Gourmet.
Frei also points out that service businesses have two choices in dealing with variability – either to accommodate it or to reduce it (ibid. , p. 5). For Gate Gourmet, however, it does not have the luxury of managing customer demand variabilities, so it must accommodate them, which means that, apart from its own processes, Gate Gourmet must focus on its supply chain to find ways to keep up with its customers. The customer variability issue is important, even though it deals with the part of the supply chain between Gate Gourmet and its customers because it creates many of the potential challenges farther up the supply chain.
Because Gate Gourmet relies on quick delivery for many of its supplies, its supply chain is at risk from environmental conditions such as traffic or bad weather that makes delivery times uncertain, and high demand for certain time slots that may make receiving and processing supplies more difficult (Minguela-Rata & De Leeuw, 2013). A delay in a flight could also have a serious impact as well.
The processes for preparing and packaging meals and other supplies for loading on the aircraft relies on careful timing and an efficient process; if one is delayed, that could create a space constraint, puts the loading of that particular aircraft when it finally is ready out of sequence, which could delay the servicing of other aircraft, and if the delay is long enough, could even result in some of the meals and supplies having to be re-prepared because of limited shelf life. Gate Gourmet could plan to respond to “ unexpected” challenges, such as speeding up production processes to gain time or forecasting a certain amount of supplies over actual demand to cover unanticipated additions or changes to orders.
If the company does that, however, it risks creating a “ bullwhip effect, ” which can have other negative consequences. 2. The “ Bullwhip Effect” in the supply chain and how it would affect Gate Gourmet: The definition of the “ bullwhip effect” as it is given in research literature is an ‘ effect that occurs when demand order variability increases as one move up (i. e., away from customer demand) the supply chain’ (Lee, Padmanabhan & Whang, 1997 (1), pp.
1-2; Chen, Ryan & Simchi-Levi, 2000, p. 270). To explain it in simple terms, we can use Gate Gourmet as an example: The customer is the airline, which has a demand for a certain number of meals for a particular flight; for example, purposes, let’ s say the flight has 200 passengers. Because Gate Gourmet operates according to a “ just-in-time” model, it orders the necessary amount of food ingredients from its supplier to arrive at its preparation center no later than the time at which Gate Gourmet needs to begin its preparations; for example, two hours before the flight’ s departure time.
Gate Gourmet relies on the information provided to it by its customer (the airline) in order to schedule receipt of its order from the supplier, and that supplier, in turn, relies on that order information provided by Gate Gourmet in order to order from its supplier, and so on, for each of the levels in the supply chain.
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Beesley, A., 2010, ‘Time compression in the supply chain’, in Waters, D. (ed.) Global Logistics, 6th ed., pp. 69-91. London: Kogan Page.
Chen, F., Ryan, J.K., and Simchi-Levi, D., 2000, ‘The impact of exponential smoothing forecasts on the bullwhip effect’, Naval Research Logistics, Vol. 47, pp. 269-286.
Frei, F.X., 2006, ‘Breaking the trade-off between efficiency and service’, Harvard Business Review, November 2006. Available from http://hbr.org/search/R0611E&legacy=true? name=itemdetail&referral=4320&id=R0611E.
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Lee, H.L., Padmanabhan, V., and Whang, S., 1997 (1), ‘The bullwhip effect in supply chains’, Sloan Management Review, Vol. 38, No. 3, pp. 93-102.
Lee, H.L., Padmanabhan, V., and Whang, S., 1997 (2), ‘Information distortion in a supply chain: The bullwhip effect’, Management Science, Vol. 43, No. 4, pp. 546-558.
Minguela-Rata, B., and De Leeuw, S., 2013, ‘Managing the last mile of the supply chain for spare parts’, Universia Business Review, 3rd trimester, pp. 104-117.