Sales and Operations Planning of Mintendo Game Girl in the Supply Chain

It is late June, and Sandra Huchim, head of operations at Mintendo, and Bill Smith, head of sales of We “R” Toys, are about to get together to discuss production and mar­keting plans for the next 6 months. Mintendo is the man­ufacturer of the popular Game Girl handheld electronic game that is sold exclusively

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Promotion Challenges at Gulmarg Skis in the Supply Chain

Management at Gulmarg Skis was surprised in the previ­ous season when a competitor, Kitz, discounted their skis by $50 in October. In a market in which discounting was rare, this was an unusual move by Kitz. As a result, Gulmarg saw a significant drop in sales between October and January. The company did not

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Lack of Supply Chain Coordination and the Bullwhip Effect

Supply chain coordination improves if all stages of the chain take actions that are aligned and increase total supply chain surplus. Supply chain coordination requires each stage of the supply chain to share information and take into account the impact its actions have on other stages. A lack of coordination occurs either because different

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The Effect on Performance of Lack of Supply Chain Coordination

The lack of coordination in a supply chain increases variability and hurts the supply chain surplus. We discuss the impact of the bullwhip effect on various costs in the P&G diaper supply chain. 1. Manufacturing Cost The lack of coordination increases manufacturing cost in the supply chain. As a result of the bullwhip effect,

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Obstacles to Coordination in a Supply Chain

Any factor that leads to either local optimization by different stages of the supply chain or an increase in information delay, distortion, and variability within the supply chain is an obstacle to coordination. If managers in a supply chain are able to identify the key obstacles, they can then take suitable actions to help

Managerial Levers to Achieve Coordination in a Supply Chain

Having identified obstacles to coordination, we now focus on actions a manager can take to help overcome the obstacles and achieve coordination in the supply chain. The following managerial actions increase total supply chain profits and moderate information distortion: Aligning goals and incentives Improving information visibility and accuracy Improving operational performance Designing pricing strategies

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Continuous Replenishment and Vendor-Managed Inventories in a Supply Chain

Information distortion can be dampened by practices that assign replenishment responsibility across the supply chain to a single entity. Replenishment decisions made by a single entity ensure visibility and a common forecast that drives orders across the supply chain. Two common indus­try practices that assign a single point of responsibility are continuous replenishment programs

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Collaborative Planning, Forecasting, and Replenishment in a Supply Chain

The VICS Association has defined CPFR as “a business practice that combines the intelligence of multiple partners in the planning and fulfillment of customer demand.” In this section, we describe CPFR and some successful implementations. It is important to understand that success­ful CPFR can be built only on a foundation in which the two

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Achieving Coordination in a Supply Chain in Practice

Quantify the bullwhip effect. Companies often have no idea that the bullwhip effect plays a significant role in their supply chain. Managers should start by comparing the variability in the orders they receive from their customers with the variability in orders they place with their suppliers. This helps a firm quantify its own contribution

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The Role of Cycle Inventory in a Supply Chain

A lot or batch size is the quantity that a stage of a supply chain either produces or purchases at a time. Consider, for example, a computer store that sells an average of four printers a day. The store manager, however, orders 80 printers from the manufacturer each time he places an order. The

Estimating Cycle Inventory-Related Costs in a Supply Chain in Practice

When setting cycle inventory levels in practice, a common hurdle is estimating the ordering and holding costs. Given the robustness of cycle inventory models, it is better to get a good approxi­mation quickly rather than spend a lot of time trying to estimate costs exactly. Our goal is to identify incremental costs that change

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Economies of Scale to Exploit Fixed Costs in a Supply Chain

To better understand the trade-offs discussed in this section, consider a situation that often arises in daily life—the purchase of groceries and other household products. These may be purchased at a nearby convenience store or at a Costco (a large warehouse club selling consumer goods), which is generally located much farther away. The fixed

Aggregating Multiple Products in a Single Order in a Supply Chain

As we have discussed earlier, a key to reducing lot size is the reduction of the fixed cost incurred per lot. One major source of fixed costs is transportation. In several companies, the array of prod­ucts sold is divided into families or groups, with each group managed independently by a sepa­rate product manager. This

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Economies of Scale to Exploit Quantity Discounts in a Supply Chain

We now consider pricing schedules that encourage buyers to purchase in large lots. There are many instances in business-to-business transactions in which the pricing schedule displays econ­omies of scale, with prices decreasing as lot size increases. A discount is lot-size based if the pricing schedule offers discounts based on the quantity ordered in a

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Short-Term Discounting: Trade Promotions in a Supply

Manufacturers use trade promotions to offer a discounted price to retailers and set a time period over which the discount is effective. For example, a manufacturer of canned soup may offer a price discount of 10 percent for the shipping period December 15 to January 25. For all pur­chases within the specified time horizon,

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Managing Multiechelon Cycle Inventory in a Supply Chain

A multiechelon supply chain has multiple stages and possibly many players at each stage. The lack of coordination in lot sizing decisions across the supply chain results in high costs and more cycle inventory than required. The goal in a multiechelon system is to decrease total costs by coordinating orders across the supply chain.

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Delivery Strategy at MoonChem

John Kresge, vice president of supply chain, was very con­cerned as he left the meeting at MoonChem, a manufac­turer of specialty chemicals. The year-end meeting evaluated financial performance and discussed the fact that the firm was achieving only two inventory turns a year. A more careful look revealed that more than half the inven­tory

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Pricing and Delivery at KAR Foods

NZ All Natural Ice Cream (NAN) began in 1984 as a small shop in Christchurch, which is the largest city in the South Island of New Zealand. With NAN specializ­ing in producing ice cream with all natural ingredients without any artificial colors or flavors, it is highly regarded by the public concerned about health,

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The Role of Safety Inventory in a Supply Chain

Safety inventory is inventory carried to satisfy demand that exceeds the amount forecast. Safety inventory is required because demand is uncertain, and a product shortage may result if actual demand exceeds the forecast demand. Consider, for example, Bloomingdale’s, a high-end department store. Bloomingdale’s sells purses purchased from Gucci, an Italian manufacturer. Given the high

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Factors Affecting the Level of Safety Inventory in a Supply Chain

The appropriate level of safety inventory is determined by the following two factors: The uncertainty of both demand and supply The desired level of product availability As the uncertainty of supply or demand grows, the required level of safety inventories increases. Demand for milk at a supermarket is quite predictable. As a result, supermarkets

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