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Unformatted text preview: st resolution also shortens the payment cycle
time. Furthermore, automated answering service is more productive compared with
manual answering service, so it saves labor cost as well.
2.4. Sales Forecast As mentioned earlier, members of a supply chain can eliminate the bullwhip
effect and its related inefficiencies by avoiding independent multiple forecasts. VMI
indeed delegates a site replenishment decisions to upstream suppliers, but the degree of
delegation is minimal. In a typical VMI arrangement, the vendor is asked to ship a
predetermined quantity of order when the buyer inventory level falls under a certain
level. In some cases, the vendor has the liberty of shipping any quantity, but must keep
the downstream site stock from exceeding some predetermined maximum level. Such
constraints often exist because the retailers are concerned that an uncontrolled vendor
may have the incentive to ship too many units to the retailer. However, such constraints
do not leave much for the vendor to use her judgment on future market demand. This is
sometimes unfortunate, since the vendor may have plenty of expertise and market
information to judge the future market movement better than the retailer. For example,
Warner-Lambert, a pharmaceutical manufacturer, possesses deep knowledge on how
weather conditions could impact the sales of their pharmaceutical products. To exploit
the vendors superior forecasting capabilities, retailers including Wal-Mart formed an
initiative called Collaborative Forecasting and Replenishment (CFAR), which calls for
the retailers and the manufacturers to exchange knowledge and jointly develop forecasts
and replenishment plans.
The common form of forecast sharing involves a downstream site sharing the
information to the supplier, as it is closer to the market and is thus better positioned to
forecast future market demand. Companies like SUN, HP and Texas Instrument share
their forecasts with suppliers as part of their Quantity-Flexible (QF) contracts (see ).
Forecasts serve as advanced notification for future orders to the supplier,...
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- Fall '08
- Industrial Engineering