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Chapter 10 Notes

Supply chain coordination aims to maximize total profits across all stages, while the bullwhip effect causes order fluctuations that increase costs and reduce customer satisfaction. Obstacles to coordination include misaligned incentives, lack of information sharing, and operational inefficiencies. Managers can enhance coordination through aligned goals, information sharing, and practical approaches like Vendor Managed Inventory (VMI) and Collaborative Planning, Forecasting, and Replenishment (CPFR).

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20 views2 pages

Chapter 10 Notes

Supply chain coordination aims to maximize total profits across all stages, while the bullwhip effect causes order fluctuations that increase costs and reduce customer satisfaction. Obstacles to coordination include misaligned incentives, lack of information sharing, and operational inefficiencies. Managers can enhance coordination through aligned goals, information sharing, and practical approaches like Vendor Managed Inventory (VMI) and Collaborative Planning, Forecasting, and Replenishment (CPFR).

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adin27352
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Chapter 10: coordination in a supply chain

Summary 1: Describe supply chain coordination and the bullwhip effect, and their impact
on supply chain performance
Supply chain coordination requires all stages to take actions that maximize total supply chain
profits. A lack of coordination results if different stages focus on optimizing their local
objectives or if information is distorted as it moves across the supply chain. The
phenomenon that fluctuation in orders increases as one moves up the supply chain from
retailers to wholesalers to manufacturers to suppliers is referred to as the bullwhip effect.
This effect results in an increase in all costs in the supply chain and a decrease in customer
service levels. The bullwhip effect moves all parties in the supply chain away from the
efficient frontier and results in a decrease in both customer satisfaction and profitability
within the supply chain.
Summary 2: Identify obstacles to coordination in a supply chain.
A key obstacle to coordination in the supply chain is misaligned incentives that result in
different stages optimizing local objectives instead of total supply chain profits. Other
obstacles include lack of information sharing, operational inefficiencies leading to large
replenishment lead times and large lots, sales force incentives that encourage forward
buying, rationing schemes that encourage inflation of orders, promotions that encourage
forward buying, and a lack of trust that makes any effort toward coordination difficult.
Summary 3: Discuss managerial levers that help achieve coordination in a supply chain.
Managers can improve coordination in the supply chain by aligning goals and incentives
across different functions and stages of the supply chain. Other actions that managers can
take to improve coordination include sharing of sales information and collaborative
forecasting and planning, implementation of single-point control of replenishment,
improving operations to reduce lead times and lot sizes, E D L P and other pricing strategies
that limit forward buying, and the building of trust and strategic partnerships within the
supply chain. Top management commitment, the devotion of resources to coordination, and
a focus on communication across the supply chain are important requirements for
coordination to improve in practice.
Summary 4: Understand some practical approaches to improve coordination in a supply
chain.
V M I and C P F R are two practical approaches to improve coordination in the supply chain.
Under V M I, the supplier is responsible for managing product inventories at the retailer
while ensuring an agreed upon level of service. Under C P F R, supply chain members
manage forecasting, planning, and replenishment in a collaborative manner. Partners may set
C P F R relationships to collaborate on store events, D C replenishment, store replenishment,
or assortment planning. D C replenishment collaboration is often the easiest to implement
because it requires aggregate-level data. Store replenishment collaboration requires a higher
level of investment in technology and data sharing to be successful.

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