Supply Chain

Coordination
and Use of Technology
Amir Manzoor
Management Sciences
Department

The Bullwhip Effect

Small changes in product demand by the consumer
at the front of the supply chain translate into wider
and wider swings in demand experienced by
companies further back in the supply chain.
Companies at different stages in the supply chain
come to have very different pictures of market
demand and the result is a breakdown in supply
chain coordination.
Companies behave in ways that at first create
product shortages and then lead to an excess
supply of products.

Boom-to-bust business
cycle
The cycle starts when strong market demand creates a shortage of
product.
Distributors and manufacturers steadily increase their inventories
and production rates in response to the demand.
At some point either demand changes or the supply of product
exceeds the demand level.
Distributors and manufacturers do not at first realize that supply
exceeds demand and they continue building the supply.
Finally the glut of product is so large that everyone realizes there is
too much.
Manufacturers shut down plants and lay off workers.
Distributors are stuck with inventories that decrease in value and
can take years to work down.
A good example is telecommunication industry.

Coordination in the
Supply Chain
Obstacles in Coordination
Incentive Obstacles
Information Processing Obstacles
Operational Obstacles
Pricing Obstacles
Behavioral Obstacles

Coordination in the Supply

Chain (contd.)
Managerial Levers to achieve
coordination
Aligning goals and incentives
Improving information accuracy
Improving operational performance
Designing pricing strategies to stabilize
orders
Building strategic partnerships and trust

Flow of Inventory through

a Synchronized Supply Chain

Collaborative Planning, Forecasting,

and Replenishment (CFPR)

To facilitate the coordination that is needed in supply chains, an

industry group known as the Voluntary Interindustry Commerce
Standards (VICS) group has set up a committee to investigate
collaborative planning, forecasting, and replenishment issues
(CPFR).
This committee documents best practices for CPFR and creates
guidelines to follow for CPFR.
The CPFR process is divided into the three activities of planning,
forecasting, and replenishment. Within each activity there are
several steps:
Collaborative Planning
Negotiate a front-end agreement on responsibilities of
collaborating partners
Build a joint business plan
Collaborative Forecasting
Create sales forecasts, identify and resolve any exceptions or
differences between companies
Collaborative Replenishment
Create order forecasts, identify and resolve exceptions between

Information Systems that Support the Supply Chain

Data Capture and Data Communications
The Internet
Broadband
EDI
XML

Data Storage and Retrieval

Database technology

Data Manipulation and Reporting

Enterprise Resource Planning (ERP) (gather data from across multiple functions in a
company)
Procurement Systems (focus on the procurement activities)
Advanced Planning and Scheduling (analytical applications whose purpose is to assess plant
capacity, material availability, and customer demand)
Transportation Planning Systems (calculate what quantity of materials should be brought to
what locations at what times)
Demand Planning (use special techniques and algorithms to help a company forecast their
demand)
Customer Relation Management (CRM) and Sales Force Automation (SFA) (automate many of
the tasks related to servicing existing customers and finding new customers)
Supply Chain Management (SCM)
Inventory Management Systems
Manufacturing Execution Systems (MES) (carrying out the production activities in a factory)
Transportation Scheduling Systems (less analytical and more focused on daily operational
issues)
Warehouse Management Systems (WMS) (support daily warehouse operations)

Assessing Technology and

System Needs
Know your goal
Do not let the complexity or the
details of any technology or system
be a distraction from this basic truth.

E-Business and Supply Chain

Integration
Four key impacts of E-business on
supply chain integration
Information integration
Planning and Synchronization
Workflow coordination
New business model

Case Study

Integrated Logistics
Management System