The Role of IT in Aggregate Planning in a Supply Chain

Aggregate planning is arguably the supply chain area in which information technology has been used the most. The earliest IT supply chain products were aggregate planning modules, often called factory, production, or manufacturing planning. Some of the early modules focused only on obtaining a feasible production plan subject to constraints arising from demand and

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Implementing Aggregate Planning in a Supply Chain in Practice

Think beyond the enterprise to the entire supply chain. Most aggregate planning today takes only the enterprise as its breadth of scope. However, many factors outside the enter­prise and throughout the supply chain can affect the optimal aggregate plan dramatically. There­fore, avoid the trap of thinking only about your own enterprise when planning. Work

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Aggregate Planning of Kloss Planters and Harvesters in Supply Chain

Kevin Cho, general manager at Kloss Planters and Har­vesters (KPH), left the meeting with his strategic plan­ning team wondering whether it made sense to replace the separate plants for planters and harvesters with a single plant that could assemble both. 1. A Brief History of Planters and Harvesters Since humans started farming, they have

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Responding to Predictable Variability in the Supply Chain

In Chapter 8, we discussed how companies use aggregate planning to optimally plan supply. Demand for many products changes frequently from period to period, often because of a predict­able influence. These influences include seasonal factors that affect products (e.g., lawn mowers and ski jackets), as well as nonseasonal factors (e.g., promotions or product adoption

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Managing Supply in the Supply Chain

A firm can vary supply of product by controlling a combination of the following two factors: Production capacity Inventory In general, companies use a combination of varying capacity and inventory to manage sup­ply. In the following sections, we list some specific approaches that allow firms to reduce the amount of capacity and inventory required

Managing Demand in the Supply Chain

Supply chains can influence demand by using pricing and other forms of promotion. For exam­ple, John Deere offers a discount to farmers who are willing to take ownership of a planter during the off-season. The further from the peak that a farmer places an order, the larger the discount offered by Deere. The goal

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Sales and Operations Planning at Red Tomato in the Supply Chain

Promotion decisions are often made by retailers without taking into account the impact on the rest of the supply chain. In this section, our goal is to show how supply chain members can col­laborate on pricing and aggregate planning (both demand and supply management) decisions to maximize supply chain profitability. Let us return to

Implementing Sales and Operations Planning in the Supply Chain in Practice

Coordinate planning across enterprises in the supply chain. For a supply chain to manage predictable variability successfully, the entire chain must work toward the one goal of maximizing profitability. Every member of a supply chain may agree with this in principle. In reality, however, it is difficult for an entire supply chain to agree

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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