Bull whip effect 3

Furthermore automated answering service is more

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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 s 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 s 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 s 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 [23]). Forecasts serve as advanced notification for future orders to the supplier,...
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