Chopra/Meindl 4/e CHAPTER SEVENTEEN Discussion Questions

!hat is the "ull#hip e$$ect and ho# does it relate to lac% o$ coordination in a suppl& chain' The "ull#hip e$$ect re$ers to the $luctuation in orders alon( the len(th o$ the suppl& chain as orders )o*e $ro) retailers to #holesalers to )anu$acturers to suppliers The "ull#hip e$$ect relates directl& to the lac% o$ coordination +de)and in$or)ation $lo#s, #ithin the suppl& chain Each suppl& chain )e)"er has a di$$erent idea o$ #hat de)and is- and the de)and esti)ates are (rossl& distorted and e.a((erated as the suppl& chain partner is distanced $ro) the custo)er

!hat is the i)pact o$ lac% o$ coordination on the per$or)ance o$ a suppl& chain' The i)pact o$ lac% o$ coordination is de(radation o$ responsi*eness and poor cost per$or)ance $or all suppl& chain )e)"ers As the "ull#hip e$$ect rears its u(l& head- suppl& chain partners $ind the)sel*es #ith e.cessi*e in*entor& $ollo#ed "& stoc%outs and "ac%orders The $luctuations in in*entor& result in increased holdin( costs and lost sales- #hich in turn spi%e transportation and )aterial handlin( costs 0lti)atel&- the stru((le #ith cost and responsi*eness hurts the relationships a)on( suppl& chain partners as the& see% to e.plain their lac% o$ per$or)ance

2n #hat #a& can i)proper incenti*es lead to a lac% o$ coordination in a suppl& chain' !hat counter)easures can "e used to o$$set this e$$ect' 2ncenti*e o"stacles occur in situations #hen di$$erent participants in the suppl& chain are )oti*ated "& sel$ interest 2ncenti*es that $ocus onl& on the local i)pact o$ an action result in decisions "ein( )ade that achie*e a local opti)u) "ut can a*oid a (lo"al +suppl& chain, opti)u) All suppl& chain partners )ust a(ree on (lo"al per$or)ance )easures and structure re#ards such that )e)"ers are appropriatel& )oti*ated Sales $orce incenti*es also are responsi"le $or counterproducti*e suppl& chain "eha*ior Co))issions that are "ased on a sin(le short ti)e $ra)e can "e (a)ed "& the sales $orce to )a.i)i3e co))ission "ut these actions inad*ertentl& increase de)and *aria"ilit& and e.ert pressure on the suppl& chain Co))issions should "e structured to pro*ide incenti*es to consistentl& sell lar(e *olu)es o$ product o*er a "road ti)e $ra)e to the sell4throu(h point

Chopra/Meindl 4/e 4 !hat pro"le)s result i$ each sta(e o$ a suppl& chain *ie#s its de)and as the orders placed "& the do#nstrea) sta(e' Ho# should $ir)s #ithin a suppl& chain co))unicate to $acilitate coordination' 2$ each sta(e o$ a suppl& chain *ie#s its de)and as the orders placed "& their do#nstrea) counterpart- the "ull#hip e$$ect is reali3ed "& the suppl& chain Each )e)"er de*elops a $orecast that is "ased on so)ethin( other than the true custo)er de)and and hilarit& ensues Suppl& chain )e)"ers should share point4 o$4sale +P5S, data so that all )e)"ers are a#are o$ the true custo)er de)and $or product The "eaut& o$ data sharin( re6uire)ents is that onl& a((re(ate P5S data )ust "e shared to )iti(ate the "ull#hip e$$ect7 there is no need to share detailed P5S data 8 !hat $actors lead to a "atchin( o$ orders #ithin a suppl& chain' Ho# does this a$$ect coordination' !hat actions can )ini)i3e lar(e "atches and i)pro*e coordination' 5rder "atchin( is caused "& a nu)"er o$ di$$erent $actors 5ne )echanis) is the price structure o$ T9 and 9T9 ship)ent 6uantities7 there is incenti*e to #ait a #hile to )a%e sure that a T9 ship)ent is achie*ed A custo)er:s natural tendenc& to #ait $or a )ilestone- either real or percei*ed- can also cause "atchin( Custo)ers )a& #ait until ;rida&- Monda&- the last or $irst da& o$ the )onth- etc <ust "ecause that:s #hen the& al#a&s ha*e or "ecause that e*ent re)inds the) to order 5rder "atchin( also occurs "ecause custo)ers are a#are o$ an i)pendin( price reduction and #ant to ta%e ad*anta(e o$ it =atchin( ad*ersel& a$$ects suppl& chain coordination "ecause the suppl& chain #ill "e star*ed $or $lo#- then o*er#hel)ed #ith de)and A suppl& chain can recon$i(ure their transportation and distri"ution s&ste) to allo# $or ship)ents to )ultiple custo)ers on a sin(le truc% to achie*e T9 6uantities The chain can also assi(n +or encoura(e, da&s $or placin( orders and )o*e $ro) lot4si3e "ased to *olu)e "ased 6uantit& discounts +or a"andon discounts and pro)otions alto(ether, > Ho# do trade pro)otions and price $luctuations a$$ect coordination in a suppl& chain' !hat pricin( and pro)otion policies can $acilitate coordination' Trade pro)otions and price $luctuations )a%e suppl& chain coordination )ore di$$icult Custo)ers see% to purchase (oods $or less and en(a(e in $or#ard "u&in( #hich creates spi%es in de)and that )a& e.ceed capacit& All parties #ould "ene$it i$ the suppl& chain used e*er& da& lo# pricin( +ED9P, to )iti(ate $or#ard "u&in( and allo# procure)ent- production- and lo(istics to $unction at a steadier pace 2$ price incenti*es )ust "e o$$ered- the chain is "etter ser*ed "& i)ple)entin( a *olu)e4"ased 6uantit& discount plan instead o$ a lot si3e "ased 6uantit& discount- i e - pro*idin( incenti*es to purchase lar(e 6uantities o*er a lon( period o$ ti)e- perhaps a &ear

Chopra/Meindl 4/e ? Ho# is the "uildin( o$ strate(ic partnerships and trust *alua"le #ithin a suppl& chain' Cooperation and trust #ithin the suppl& chain help i)pro*e per$or)ance $or the $ollo#in( reasons@ !hen sta(es trust each other- the& are )ore li%el& to ta%e the other part&:s o"<ecti*es into consideration #hen )a%in( decisions- there"& $acilitatin( #in4#in situations Action4oriented )ana(erial le*ers to achie*e coordination "eco)e easier to i)ple)ent and the suppl& chain "eco)es )ore a(ile An increase in suppl& chain producti*it& results- either "& eli)ination o$ duplicated e$$ort or "& allocatin( e$$ort to the appropriate sta(e Detailed sales and production in$or)ation is shared7 this allo#s the suppl& chain to coordinate production and distri"ution decisions A !hat issues )ust "e considered #hen desi(nin( a suppl& chain relationship to i)pro*e the chances o$ de*elopin( cooperation and trust' The issues that suppl& chain partners )ust consider #hen desi(nin( their chain include assessin( the *alue o$ the relationship- the operational roles and decision ri(hts $or each- the e.ecution o$ "indin( contracts- and esta"lish)ent o$ con$lict resolution )echanis)s The *alue o$ the relationship is assessed "& identi$&in( the )utual "ene$its that it pro*ides and the costs and contri"utions o$ each part& The )i. o$ e$$ort and "ene$it $or all parties should "e e6uita"le The roles and decision ri(hts ta%e into account the interdependence "et#een the parties7 the nir*ana o$ interdependence is reciprocal interdependence- #here parties co)e to(ether and e.chan(e in$or)ation and inputs in "oth directions This re6uires )ore e$$ort than se6uential interdependence "ut the pa&o$$ is increased suppl& chain surplus Mana(ers can help pro)ote trust "& creatin( contracts that encoura(e ne(otiation as unplanned contin(encies arise since co)plete in$or)ation and consideration o$ all $uture contin(encies is i)possi"le The pri)ar& contacts $ro) each side are an i)portant startin( point in de*elopin( a health& relationship E$$ecti*e contract4resolution )echanis)s can si(ni$icantl& stren(then an& suppl& chain relationship Such )echanis)s allo# parties the opportunit& to co))unicate and #or% throu(h their di$$erences- in the process "uildin( (reater trust B !hat issues )ust "e considered #hen )ana(in( a suppl& chain relationship to i)pro*e the chances o$ de*elopin( cooperation and trust' The $ollo#in( issues )erit attention #hen )ana(e)ent endea*ors to i)pro*e the chances o$ success in suppl& chain partnership@

Chopra/Meindl 4/e The presence o$ $le.i"ilit&- trust- and co))it)ent in "oth parties helps a suppl& chain relationship succeed 2n particular- co))it)ent o$ top )ana(e)ent on "oth sides is crucial $or success Cood or(ani3ational arran(e)ents- especiall& $or in$or)ation sharin( and con$lict resolution- i)pro*e chances $or success Mechanis)s that )a%e the actions o$ each part& and resultin( outco)es *isi"le help a*oid con$licts and resol*e disputes The )ore $airl& the stron(er partner teats the #ea%er- *ulnera"le partner- the stron(er the suppl& chain relationship tends to "e 1D !hat are the di$$erent CP;R scenarios and ho# do the& "ene$it suppl& chain partners' Colla"orati*e plannin(- $orecastin(- and replenish)ent +CP;R, is de$ined as a "usiness practice that co)"ines the intelli(ence o$ )ultiple partners in the plannin( and $ul$ill)ent o$ custo)er de)and 2n order to "e success$ul- the t#o parties )ust ha*e s&nchroni3ed their data and esta"lished standards $or e.chan(in( the in$or)ation The $our scenarios that sellers and "u&ers can colla"orate alon( include@ Retail e*ent colla"oration E the identi$ication o$ speci$ic SF0s that #ill "e in*ol*ed in sales pro)otions and sharin( o$ in$or)ation re(ardin( the ti)in(- duration- pricin(- ad*ertisin(- and displa& tactics to "e deplo&ed The "ene$it o$ retail e*ent colla"orations is a reduction in stoc%outse.cess in*entor& and unplanned lo(istics costs DC replenish)ent colla"oration E the $orecastin( o$ DC #ithdra#als or de)and $ro) the DC to the )anu$acturer is con*erted to a strea) o$ orders that are loc%ed in o*er a speci$ied ti)e hori3on A success$ul DC replenish)ent colla"oration reduces production costs at the )anu$acturer and in*entor& and stoc%outs at the retailer Store replenish)ent colla"oration E the $orecastin( o$ store4le*el orders that are co))itted o*er a speci$ic ti)e hori3on Such a colla"oration results in (reater *isi"ilit& o$ sales $or the )anu$acturer- i)pro*ed replenish)ent accurac& and product a*aila"ilit&- and reduced in*entories Colla"orati*e assort)ent plannin( E the $orecastin( +colla"orati*e interpretation, o$ industr& trends- )acroecono)ic $actors- and custo)er tastes $or seasonal (oods This $orecast is con*erted into a planned purchase order at the st&le/color/si3e le*el that is used to produce sa)ple products $or a $ashion e*ent "e$ore $inal )erchandisin( decisions are )ade The )anu$acturer "ene$its $ro) this colla"oration "& ha*in( )ore lead ti)e to purchase ra# )aterials and plan capacit&