COORDINATION IN THE SUPPLY CHAIN

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COORDINATION IN THE SUPPLY CHAIN
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AGENDA

• BULLWHIP EFFECT
• OBSTACLES
• MANAGERIAL LEVERS
• STRATEGIC PARTNERSHIPS
• IN PRACTICE

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BULLWHIP EFFECT

• Lack of Coordination
• Different Objectives
• Information Distortion

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BULLWHIP EFFECT

• Concept
• Fluctuations in orders
• Increase as move up supply chain

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BULLWHIP EFFECT
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AGENDA

• OBSTACLES

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OBSTACLES

• Incentive
• Local Optimization
• Function
• Firm

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OBSTACLES

• Incentive
• Sales
• Sell-in
• Sell-through

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OBSTACLES

• Information Processing
• Forecast
• Orders
• (not) Demand
• Information Sharing

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OBSTACLES

• Information Processing
• Forecast
• Orders
• (not) Demand
• Information Sharing
• NOTE CPFR Guidelines

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OBSTACLES

• Operational
• Ordering in large lots
• Why
• Fixed Costs
• Incentives
• Batching

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OBSTACLES

• Operational
• Long Replenishment Lead Times
• Bullwhip in time
• Misinterpret random as trend
• Rationing and Shortage Gaming

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OBSTACLES

• Pricing
• Lot-size quantity discounts
• Price fluctuations
• Trade discounts
• Forward buying
• Selling in rather than through

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OBSTACLES

• Behavioral
• Localizataion
• Sub-optimizing system
• Optimizing function

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AGENDA

• DRIVERS

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DRIVERS

• Align Goals and Incentives
• Across functions
• Performance evaluation and reward
• Optimize System
• Sub-optimize Activities

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DRIVERS

• Align Goals and Incentives
• Pricing
• Volume-based discounts
• Buy-back contracts

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RETURNS POLICY BUY BACK

• Net Effects
• Increase Salvage Value
• Increase Order Size
• Increase Supply Chain Profits

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RETURNS POLICY BUY BACK

• Variables

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RETURNS POLICY BUY BACK

• Expected Manufacturer Profit

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DRIVERS

• Align Goals and Incentives
• Pricing
• Quantity Flexibility Contracts

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QUANTITY FLEXIBILITY

• What
• Retailer Allowed to Change Order Size
• After Observing Demand (Ex Post)

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QUANTITY FLEXIBILITY

• Variables

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QUANTITY FLEXIBILITY

• Given

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DRIVERS

• Align Goals and Incentives
• Pricing
• Sales Force Incentives
• Moving average
• Sell through

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DRIVERS

• Improve Information Accuracy
• POS
• CPFR
• Turn and Earn

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DRIVERS

• Improve Information Accuracy
• Single Stage Control
• Continuous Replenishment Programs
• POS
• Warehouse withdrawals
• VMI

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DRIVERS

• Improve Operating Performance
• Reduce lead time
• EDI
• ASN
• Cross-docking

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DRIVERS

• Improve Operating Performance
• Reduce Lot Sizes
• Computer-aided ordering
• Consolidation
• Aggregation
• Transaction Costs

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DRIVERS

• Pricing Strategies
• Volume-based discounts
• EDLP
• Sell-through

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DRIVERS

• Strategic Partnerships
• Trust
• Cooperation

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AGENDA

• POWER
• NATURE
• DEPENDENCE
• PRACTICE

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NATURE OF POWER

• Defined
• Potential for influence
• Would not have done anyway
• Not the same as cooperation

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NATURE OF POWER

• Good or Bad?
• System Optimization
• Inevitable
• Merely a Tool
• May be used for good purpose
• May be used for bad purpose

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NATURE OF POWER

• Required by Channel
• System Optimization
• Component Sub-optimization
• Natural Tendency
• Push Costs
• Push Investment
• Push Risk
• Garner Revenue

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DEPENDENCE

• A Question of
• Utility
• Scarcity of Resources
• Human
• Knowledge
• Capital
• Physical

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DEPENDENCE

• Measuring
• Direct
• Utility
• Profit
• Sales
• Bases of Power (5)
• Scarcity
• Competitors
• Switching Costs

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DEPENDENCE

• Measuring
• Indirect/Proxy
• Profit
• Sales
• Role Performance

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DEPENDENCE

• Measuring
• Bottom Up/Bases of Power

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IN PRACTICE

• Balanced
• Net Dependence
• Symmetry
• Win Win
• Blocks Exploitation

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IN PRACTICE

• Countering Imbalance
• Develop Alternatives
• Organize Coalition
• Exit

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IN PRACTICE

• Influence Strategies

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AGENDA

• MANAGING CONFLICT
• NATURE
• CONSEQUENCES
• RESOLUTION

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DEGREE AND NATURE

• Definition
• Opposition to channel counterpart
• Opponent-centered
• Direct
• Goal sought controlled by counterpart

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DEGREE AND NATURE

• May be
• Latent inevitable
• Perceived sense
• Felt personalize
• Manifest sabotage

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DEGREE AND NATURE

• Measuring

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DEGREE AND NATURE

• Sources
• Goal
• Domain
• Perception

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CONSEQUENCES

• When Desirable
• Functional
• May lead to
• Increased communication
• Grievance outlets
• Reviews
• Equitable split
• Balance
• Standards

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CONSEQUENCES

• When Desirable
• Is not necessarily bad
• If lacking, may be sign of indifference

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RESOLUTION

• Institutional Mechanisms
• Information-Intensive
• Risky and Expensive
• Includes (examples)
• Channel Diplomat
• Trade Associations
• Exchange of Personnel
• Co-optation

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RESOLUTION

• Institutional Mechanisms
• Third-Party
• ADR
• Mediation
• Arbitration
• Forestall Conflict

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RESOLUTION

• Styles

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RESOLUTION

• Incentives
• Economic
• Non-economic
• Can we tell the difference?

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SUMMARY AND CONCLUSIONS