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Unformatted text preview: E x t e n d Y o u r K n o w l e d g e 7 - 1 : T h e B u f f e r Z o n e : F i n d i n g a h a p p y m e d i u m b e t w e e n s u p p l y a n d d e m a n d i n i n v e n t o r y m a n a g e m e n t Anyone who has been involved in inventory management knows what it is like to worry about stock levels. Finding the right balance (not too much, not too little) is critical, and yet often seemingly unattainable. Most of the problems seen in supply chains can be linked to push practices, or efforts to move inventories down the supply chain in hopes that demand will be met when (or if) it materializes. In practice this means using forecasts to man- ufacture and distribute products well in advance of demand. When the forecast proves to be unreliable, a vendor is forced to produce more than will likely be required, to protect themselves from surprises. Vendors may build and ship sea- sonal inventory, hoping the supply chain can run these stocks down by the end of the season. Customers may order products early to reserve capacity with suppli- ers, hoping they will use what they get. The effect of either action is the same manufacturing capacity is deployed well in advance of end-item demand. Some companies are using an inventory management mechanism called stock buffers to properly integrate the links in the supply chain. Stock buffers address the most serious coordination issue in production opsreplenishment in response to actual demand, prevention and minimization of excess inventories, and the identification of issues that prevent the supply chain from achieving its goals of satisfying market demand while turning an acceptable profit. Rick Sawyer, the director of supply chain management for Canadian General Tower Ltd. (CGT), is using stock buffers to maintain the companys good cus- tomer service record. CGT is the leading North American supplier of flexible polymer cover stocks, including vinyl, for a variety of industries and products like automotive interiors, swimming pools, bookbinding, roofing, and environmental containment. The automotive supply chain is shrinking lead times everywhere, making quick, reliable response times essential for survival. Compounding the challenge this created for Sawyer to deliver products was the fact that some clients were making unreliable forecasts that often left CGT scrambling at the last minute to finish orders. The company needed to change the inventory management function to lessen the impact of demand variability on the plant.The automotive industry has been putting more and more pressure on vendors to reduce lead times, says Sawyer.Because we have many products that we ship repeatedly, stock buffers are a great solution to servicing customers in a demanding environment. Forecast accuracy is an issue in every business. Some customers provide bet-Forecast accuracy is an issue in every business....
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This note was uploaded on 08/22/2009 for the course ACCT 1101 taught by Professor Davescott during the Fall '05 term at Niagara College.
- Fall '05
- Financial Accounting