When each distribution center orders from central supply or the factory independ

ently of
what other distribution centers are doing, it is called a pull system. The advan
tage is that
coordination and communication is less expensive. The disadvantage is that the l
ack of
coordination causes problems with customer service and inventories
In fixed location warehouses, cube utilization is poor because if a location has
no stock,
the space remains empty.Cube utilization must always be balanced with accessibil
ity to the goods when they are
needed. For example, a warehouse could have one hundred per cent cube utilizatio
n but
the warehouse pickers could not pick the goods. Therefore, warehouses do not ope
rate at
100% cube utilization.
The push system "pushes" inventory to distribution centers by making stocking de
cisions
centrally. The advantage is that inventory is sent where it is needed most. The
disadvantage is that the coordination is more expensive than the pull system.
The ABC method of inventory control operates on the assumption that a company's
limited resources should be used to maintain the high priority items, or A items
. The C
parts have less value and should therefore be maintained at a very high level of
inventory
so inaccuracies will not impact the operation. This would allow less resources t
o be
committed managing the low priority items.
bullwhip effect results from rational behavior by companies within the existing
structure of supply chains. As a result, companies that want to mitigate the im
pact of the bullwhip effect need to think about modifying structures and process
es within the supply chain in order to change incentives. The authors explain fo
ur major causes of the bullwhip effect as well a
s ways to counteract it.
information sharing and collaboration
Demand forecast updating
Order batching
Price fluctuation
Rationing and shortage gaming
DRIVERS OF SC: inventory, transportation, facilities, and information
Order batching: periodic and push ordering
**They take it easy in the inital quarters and then put in a big effort in the l
ast one or two quarters to achieve their targets. Such distribution of effort ha
s the hockey stick phenomenon
economics of transportation: FTL and LTL
. We contend that demand signal processing is a major contributor to the bullwhi
p effect.- COOREIDANTION IS THE REASON,The main reasons for coordination problem
s in supply chain are distributed owners of various stages of production & distr
ibution, and product variety.
** exponenial smoothing>> bigger swings perception , mistrust
In what way bullwhip effect increases costs for the supply chain?
1. In increases manufacturing cost.
2. It increases inventory cost.
3. It increases replenishment leadtimes.
4. Increases transportation cost.
5. Increaes labor cost in shipping and receiving.
All items of cost increase because excess capacity has to be installed to ta
ke care of unnecessary peaks in demand.
6. It reduces product availability due to some orders not getting filled when de
mand peaks. So some retail outlets may go out of stock.
7. Leads to problems of relationships - every body claims that they have done ri
ght. But still there is problem in the supply chain either as unfilled orders or
excess inventory not having the order from down stream side.