Question

1. Retailers, wholesalers, part suppliers, raw material suppliers, and manufacturers themselves will develop their own ordering or production strategies based on their own data and for their own benefit. In the case of promotions leading to price fluctuations, changes in consumer demand at the retailing end may result in large changes in the order quantity of upstream links. How to integrate and coordinate the supply, production, distribution and retailing entities in the supply chain to avoid the bullwhip effect mentioned above?

Answer 1

part suppliers, raw material suppliers, and manufacturers themselves will develop their own ordering or production strategies based on their own data and for their own benefit. In the case of promotions leading to price fluctuations, changes in consumer demand at the retailing end may result in large changes in the order quantity of upstream links. How to integrate and coordinate the supply, production, distribution and retailing entities in the supply chain to avoid the bullwhip effect mentioned above?

Answer:

Supply chain management makes use of a growing body of tools, techniques, and skills for coordinating and optimizing key processes, functions, and relationships, both within the OEM and among its suppliers and customers, to enable and capture opportunities for synergy. An OEM's competitive advantage is highly dependent on this integrated management function. Supply chain management attempts to combine the best of both worlds, the scale and coordination of large companies with the low costs, flexibility, and creativity of small companies.

The focus of supply chain management must evolve in response to changing business environments and evolving product life cycles. Different interactions among participants are required during each phase of the product life cycle, from inception through recycling. The supply chains for products in new markets must be flexible to respond to wide fluctuations in demand (both in quantity and product mix). Products in mature, stable markets require supply chains that can reliably deliver products at low cost. Thus, effective supply chain management must be responsive to these changing conditions to ensure that the supply chain evolves accordingly.

For example, marketing excellence used to be the primary source of Procter & Gamble's (P&G's) dominance of the consumer products industry. However, as P&G expanded its product and service offerings in response to market opportunities, the increased complexity of these offerings created difficulties in meeting the needs of retail partners and customers. Traditional marketing strategies involving in-store sales and price promotions created great variations in product demand. To meet heavy short-term marketing-induced peaks in demand, P&G invested in huge manufacturing capacities, inventories, warehouses, and logistics capabilities.

In response to these problems, P&G modified its supply chain focus and remade itself through a series of innovative initiatives. Working both internally and with suppliers and customers, the company created a heralded partnership with Wal-Mart, virtually eliminated price promotions, and streamlined its logistics and continuous replenishment programs. These initiatives reduced variations and uncertainties in demand, thereby reducing the need for surge production capacities and large inventories. Thus, by evolving their primary supply chain focus from marketing to production, inventories, and logistics in response to changing business requirements, P&G was able to reduce costs, meet customer demand, and build strong, coordinated relationships with retail partners and customers.