Harmonization of objectives and incentives, Improving the reliability...

Aligning Goals and Incentives

SC managers can improve coordination in the supply chain by agreeing on goals and incentives so that each counterparty is working to maximize supply chain performance.

The only way to coordinate decisions within the supply chain is to ensure that any counterparty's goal is to assess how its decisions are aligned with the strategic objectives of the entire chain. All solutions for production capacity, transportation, inventory management, etc. should be evaluated based on their impact on the profitability of the chain from the perspective of total costs.

Improving the reliability and efficiency of information

The UCF department of the focus company can achieve coordination by improving the accuracy and timeliness of the information available to the various links in the supply chain.

Distributing sales center data (POS data from a point of sale - selling point) through a supply chain using, for example, EDI can help to weaken the whip effect. If retailers exchange POS data with other links in the supply chain, all segments of the supply chain will be able to predict future demand based on consumer demand. The rapid exchange of information about sales helps to weaken the effect of the whip, as all links react to the same change in the demand of the end user. The use of appropriate ERP-class information systems within the UIS facilitates the dissemination of such data.

Once the POS data is distributed, the various parts of the supply chain must jointly forecast and plan their activities to achieve full coordination. Without joint planning, the distribution of POS data does not guarantee coordination.

The use of modern technologies for integrated planning and inventory management in supply chains such as VMI, CPFR, S & OP, etc. facilitates real coordination of supply chain counterparties and increases overall chain efficiency.

Improving operational functioning

By reducing the length of the replenishment cycle, SC managers can reduce the uncertainty of demand during the order execution cycle. Reducing the cycle of order fulfillment is particularly beneficial for seasonal goods, as it helps increase the number of orders in the season with a significant increase in forecast accuracy. Thus, reducing the duration of the replenishment cycle contributes to the weakening of the whip's effect by reducing the basic uncertainty of demand.

Managers can take many actions in different parts of the supply chain in order to help reduce the time of replenishment cycles. EDI and other electronic forms of communication can be used to significantly reduce the time associated with the placement of the order and the transfer of information. When carrying out production, high versatility and mass customization (mass customization) method can be used to achieve a significant reduction in the lead time for an order. Reducing the amplitude of deviations when eliminating the whip effect, in addition, shortens the lead time of the order due to the stabilization of the demand and, as a result, improved production planning. This is especially important when a large range of products is produced.

The SC manager can reduce the size of the whip effect by performing operational improvements that reduce the size of the order. Reducing the size of the order reduces the number of fluctuations that can accumulate between any pairs of links in the supply chain, thereby reducing unnecessary inventory. In order to reduce the size of the order, managers must take steps that will help reduce the fixed costs associated with the process of registration, transportation and receipt of each order.

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