Implication of availability of information on effective design and management of the integrated supply chain.
This abundant information:
Helps reduce variability in the SC
Helps suppliers make better forecasts
Enables the coordination of manufacturing and distribution systems and strategies
Enables retailers to better serve their customers by offering tools for locating desired items
Enables lead time reductions
Can valid information be a substitute for inventory? Information Informed managers Less uncertainty Better decisions Less inventory Why focus on information? It costs less than inventory and poses fewer risks.
In recent years, many suppliers and retailers have observed that while customer demand for specific products does not vary much, inventory and back-order levels fluctuate considerably across their supply chain
Ex: Pampers disposal diapers
This increase in variability as we travel up the SC is referred to as the bullwhip effect
Bullwhip Effect The magnification of variability in orders in the supply-chain Order Quantity Time Retailer’s Orders A lot of retailers each with little variability in their orders…. Order Quantity Time Wholesaler’s Orders … can lead to greater variability for a fewer number of wholesalers, and … Order Quantity Time Manufacturer’s Orders … can lead to even greater variability for a single manufacturer.
Planning personnel often act as “expeditors” - reacting to supply constraints and fighting fires instead of planning! Effective Forecasts Sales: we can sell 200 Marketing: the promotion will sell 400 Finance: we have budget of 300 Manufacturing: they will only sell 150 Various departments have conflicting goals or make inconsistent plans! Poor communication, lack of visibility Planning Dept. Planning 20% Responding 80% Disconnect between planning and execution
Retailers forecasts (pricing, promotions, release of new products, …). Some of these issues are controlled by the retailer but some are controlled by the distributor, wholesaler, manufacturer, or the competitors.
Distributor and manufacturer forecasts are influenced by factors under retailer control.
Manufacturer or distributor has fewer products to consider more information about these products
Cooperative forecasting systems: sophisticated information system involving participation of all
Produce a consensus forecast for the supply chain
Collaborative planning, forecasting, and replenishment
A strategy intended to improve communication throughout the retail supply chain, and, in particular enable better forecasting between partners
With CPFR, retailers give suppliers freer access to point-of-sale data
Such information is necessary for making joint forecasting and replenishment programs work more effectively
The goal - to give the supplier/manufacturer more upfront time and more information so that they can make better informed manufacturing plans