5. In the supply chain, manufacturers can have a variety of relationships with r
ID: 422744 • Letter: 5
Question
5. In the supply chain, manufacturers can have a variety of relationships with retailers. i. In an industry you are familiar with, suppose that the two supply chain actors are both forecasting demand. Which measure or measures of forecast error would be of the most interest to each of the actors? Explain your answer with reference to your example. (5 marks) ii. For these two supply chain actors, which factors affect the distribution of the benefits of innovation? Use an example to explain your answer. (10 marks) ii Provide an example of collaboration between manufacturer and retailer that concerns the management of in-store inventory. Identify the supply chain performance measures being targeted and the conditions under which the collaboration would be successful. (10 marks)Explanation / Answer
Que-1
Right measurement of changes in behavioural parameters such as changes in the real prices of fuel or road traffic, will affect transportation and logistics costs, or either, say inventory carrying costs from one place to another, in context with limited Warehousing capacities with manufacturer or same/ limited inventory holding capacity with retailer outlet. This brings an error in right demand forecasting, when ignored.
Even fluctuations in Freight volumes/ per tonnage/ costing etc. can be a trouble to get right forecasting figures and hence commercial advantages, in turn they affect bottom line of both manufactures and retailers, when not rightly calculated as factors involved in demand forecasting.
Que-2
Innovative products/ technologies need correct amount of data and quality of data to be available to make any correct demand forecasting or even during it’s launch in the market. Else, the product can be a big failure, due to excess supply and low demand among consumers, or lack of supply with excess demand among consumers, or less awareness among consumers. Correct demand forecasting is based on what target segment customer requires new products, in how much volume, at what frequency, whether your demand is normal or seasonal, what is the secondary or primary research done to tell how likely they are to buy your new products.
Above needs to be correctly determined by both the manufacturer as well as the retailer, as they together are an integral part of demand forecasting and affect supply chain in their own way, be movement of material, or information flow with customers and each others, to finally determine demand forecasting.
Que-3
Collaboration of manufacturer and retailer can be well described by either Walmart or Amazon.
Walmart stores need to collaborate in terms of right data/information flow regarding inventories to the sellers/ manufactures as what type/ category of products/ items and how many (volume) will be required on daily/ weekly/ monthly basis, based on demand forecasting, so that sellers can sell and deliver maximum in one go and Walmart stores keep replenished with inventory and maintain the correct stock level, so that customers don’t need to wait for any products and buy more or more at the stores.
Similarly Amazon also avoids any Bull whip effect, that is, distortion or block in movement of inventories from its sellers/ manufactures to the online customers, avoiding any logistics or delivery issue, of course by doing correct demand forecasting as per the product categories and diversity/ geography.
Supply chain performance measures:
– Average inventory
– Inventory turns
– Products with more than a specified number of days of inventory
– Average replenishment batch size
– Average safety inventory
– Seasonal inventory
– Fill rate
– Fraction of time out of stock
– Obsolete inventory
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