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Supply Chain Coordination (Obstacles to Coordination (Incentive (increases…
Supply Chain Coordination
Bullwhip effect
causes a big arc in the supply chain
distorts demand info within the SC
caused due to loss of coordination in the supply chain
Effects on Performance
lack of coordination increases variability
increases the costs
decreases product Availability & Profitability
great impact on cost
Manufacturing cost
inventory cost
replenishment lead time
transportation cost
labor cost for shipping and receiving
level of product availability
relationships across SC
KEY POINT
lack of coordination hurts both responsiveness & cost by making it more expensive to provide a given level of product availability
Obstacles to Coordination
Incentive
increases variability
reduces total SC profits
local optimization within functions or stages of SC
sales force incentives
Information Processing
lack of information sharing
forecasting based on orders and not customer demand
increase in variability
Operational
occurs when placing & filling orders lead to increase in variability
ordering in large lots
large replenishment lead times
rationing & shortage gaining
Pricing
occurs due to increase in variability of orders placed
occurs due to price fluctuations
lot - sized based quantity decisions
Behavioral
learning within organizations
information distortion
lack of trust among SC partners
Achieving Coordination
Aligning goals & incentives
work to maximize total SC profits
align goals
align incentives
pricing fro coordination
after sales force incentives from sell - in to sell - through
Improving information accuracy
sharing customer demand data
implementing collaborative forecasting & planning
designing single stage control of replenishment
Continuous Replenishment Programs (CRP)
wholesaler or manufacturer replenishes based on POS data
Vendor Managed Inventory (VMI)
Manufacturer/ Supplier is responsible for all decisions regarding inventory
Improving operational performance
reducing replenishment lead time
reducing lot sizes
rationing based on past sales and sharing information to limit gaming
Designing Pricing Strategies to Stabilize Orders
encourage retailers to order in smaller lots & reduce forward buying
Moving from lot sized - based to volume - based quantity disocunts
Stabilizing pricing
Building strategic partnerships & trust
Building Strategic Partnerships and Trust
Collaborative Planning, Forecasting & Replenishment (CPFR)