2. IMPROVING
INFORMATION ACCURACY
Sharing Point Of Sale (POS) Data
Reduce the bullwhip effect.
Facilitate to forecast future demand based
on customer demand.
Reduce information distortion
Example:
Wal-Mart and P&G share POS data with their suppliers
Dell shares demand data as well as current inventory
position of components with its supplier
Chapter 10-Coordination In A Supply Chain
3. Continued……
Collaborative Forecasting And Planning
Stages must forecast and plan jointly
Without collaborative planning , sharing of POS data
does not guarantee coordination
Must be aware of the retailer’s promotion plans
Voluntary Interindustry Commerce Standard (VICS)
association has set up a Collaboration
Planning, Forecasting and Replenishment (CPFR)
committee to identify best practices and
design guidelines
Chapter 10-Coordination In A Supply Chain
4. Continued……..
Designing Single-stage Control Of
Replenishment
Can Help diminish information distortion
The key replenishment is at the retailer
Eliminate the problem of multiple forecasts
Continuous Replenishment Programs(CRP)
Wholesaler, manufacturers or 3rd party
replenishes based on POS data
Vendor Managed Inventory (VMI)
A type of CRP, where the Manufacturer or Supplier is responsible for all
decisions regarding inventory
Chapter 10-Coordination In A Supply Chain
5. Improving Operational
PerformanceReducing Replenishment Lead Time
Reduce uncertainty in demand
Especially beneficial for seasonal items
Electronic Data Interchange (EDI) can significantly
cut the lead time
At manufacturing plant , increased Flexibility
and Cellular manufacturing can be used
Advance Ship Notices (ASN) & Cross-docking can
be used to reduce lead time
Example: Wal-Mart has used many of these approaches
Chapter 10-Coordination In A Supply Chain
6. Continued…..
Reducing Lot Sizes
Reduction of information distortion by implementing
operational improvements-reduce lot sizes
Decreases the amount of fluctuation – decreasing
distortion
Reduce the Fixed costs associated with ordering,
transporting and receiving each lot
Aggregating deliveries across many products and
suppliers
Chapter 10-Coordination In A Supply Chain
7. Continued…..
Computer-Assisted Ordering (CAO) & EDI help to
reduce the Fixed costs
Simplify ordering by eleminating the use of purchase
orders
Shipping in TL sizes by combining shipments
Technology and other methods to simplify receiving
-ASNs, Bar Coding, RFID
Changing customer ordering behavior
Chapter 10-Coordination In A Supply Chain
8. Continued….
Rationing Based On Past Sales And Sharing
Information To Limit Gaming
Discourages retailers from artificial
inflating their orders
“Turn-and-earn”
-To allocate the available supply based on
past retailer sales rather than orders
Information Sharing
-Improve the accuracy of forecast
- Flexible capacity
Chapter 10-Coordination In A Supply Chain
9. Designing Pricing Strategies
To Stabilize Orders
Encouraging Retailers To Order In Smaller Lots
And Reduce Forward Buying
Moving From Lot Size-based To Volume-based
Quantity Discounts
Consider total purchases over a specified time period
Eliminates the incentive to increase the size of a single lot
Reduce order variability
Example: HP
Chapter 10-Coordination In A Supply Chain
10. Continued…
Stabilizing Pricing
Eliminate promotions ( everyday low pricing,
EDLP)
-Dampen the bullwhipe effect
Limit quantity purchased during a promotion
-Decrease forward buying
Chapter 10-Coordination In A Supply Chain
11. Continued……
Tie Promotion Payments To Sell-through
Rather Than Amount Purchased
-Retailers obtain no benefit
- Reduce information distortion
- Facilitates the tying of promotions
directly to customer sales
Chapter 10-Coordination In A Supply Chain
