# Multiple sourcing encourages the least competition

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Chapter 1 / Exercise 12
Numerical Analysis
Burden/Faires
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Multiple sourcing: encourages the least competition before the award and the most
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Chapter 1 / Exercise 12
Numerical Analysis
Burden/Faires
Expert Verified
Final Exam Study Guide 8 cooperation after. “Pushing the Envelop” case study is meant to illustrate the concepts of cooperation and competition. In the end, the government went with dual sourcing of the jet engines, and sacrificed efficiency for the ability to keep the supplier honest by having a second credible supplier available. Collaboration One important application of how collaboration enters into relationships with suppliers is Collaborative Planning, Forecasting and Replenishment (CPFR). Managing variability Variability can be systematic or unsystematic. Systematic variability is variability that can be predicted. Seasonal patterns to sales Growth trends Correlations with new store openings, new market entries Unsystematic variability is all other variability that cannot be predicted. Demand forecasting When variability is systematic, we can plan ahead. Build inventory in advance of the peak season Hire temporary workers for a peak season The goal of demand forecasting is to explain as much variability as possible and describe or quantify variability that cannot be explained. That is, explain the systematic variability and describethe unsystematic variability. Collaborative forecasting example Suppose we distribute Duvel to a local brasserie. Here are the last three weeks of orders:
Final Exam Study Guide 9 Week 1 Week 2 Week 3 Monday 61 82 64 Tuesday 56 48 52 Wednesday 98 112 56 Thursday 53 58 38 Friday 40 49 47 Saturday 45 49 108 Sunday 116 59 43 What is your forecast for tomorrow? Without any further information, the best that you can do is: Average sales = 63.5 Standard deviation of sales = 24.4 But suppose “I know something you don’t know…” Suppose this establishment is running promotions without letting us (the distributor) know. The “peaks” seem like unsystematic variability to us since we don’t know when they are coming. If the bar owner told us when the promotions were coming, we could improve our forecast. (In this case we could reduce our forecast error from 30% to 15%). Manufacturers and retailers have common goals… Reduced inventory Increased service levels Increased sales Lower supply chain costs Fewer returns 02040608010012014012345678910111213141516171819202122DaySales of Duvel02040608010012014012345678910111213 141516 171819 202122DaySales of Duvel
Final Exam Study Guide 10 …but different supply chain information: Manufacturers – Promotional information, new product introductions, supply constraints, product seasonal profiles Retailers – Store promotions, store openings and closings, changing distribution profiles, competitive manufacturer activity Information is Valuable Hidden Information is a cause of supply chain incentive mis-alignment.