Without these, there is great risk of creating the bullwhip effect. The bullwhip can be defined as the amplification of demand order variability’s in the supply chain. The bullwhip effect begins at retail level, when demand for products slightly change. To ensure each party along the supply chain has enough stock to equal demand, orders are slightly exaggerated in order for them to have ‘just-in-case stock’. Larger orders are made as we move further from the retailer.
It Outsourcing INTRODUCTION Companies are increasingly outsourcing the management of information technology (IT) for reasons that include concern for cost and quality, lagging IT performance, supplier pressure, access to special technical and application skills, and other financial factors. The outsourcing solution is acceptable to large and small firms alike because strategic alliances are now more common and the IT environment is changing rapidly. REASON TO OUTSOURCE Although the mix of factors raising the possibility of outsourcing varies widely from one company to another, there are a series of themes that explain most of the pressures to outsource. First of all, general managers’ concerns about cost and quality drive outsourcing. The same issues such as getting existing services for a reduced price at acceptable quality standard came up repeatedly.
The question then arises; should companies continue to use JIT in the event of major uncontrollable environment occurrences? According to Srinidhi and Tayi (2004), companies that are flexible enough and are able to change from a JIT system to a traditional inventory system will have a competitive advantage over other firms who do not switch. In such uncontrollable environments, the major benefit of JIT becomes a handicap with the increase in delivery times and the added data handling and coordination required in such times. This leads to a decrease in quick response time, which ultimately leads to increase in costs to the firm. During hard economic times it may be possible for a firm to switch suppliers be it from domestic to international or vice-versa for some required materials.
Upon seeing long of people waiting for the product, sellers either hike the price or bring in more supplies if it were possible. If more suppliers are brought, equilibrium price goes back to normal. If supply cannot be increased, sellers increase the price of the product or service. In an efficient market, price increase brought about by a crisis of otherwise is natural. Due to surge in demand, people cannot get the same product at the original price during shortage.
However, the issue becomes that due to the delays in the system, the production rate fluctuations are magnified. Discrepancies in customer order rate can have a significant impact on the inventory levels, production rate, and labor force. Depending on the level of sensitivity in the adjustment times, these changes could lead to product shortages/overages and end up being very costly to the firm. Periodicity of Flucuations The amount of time it takes for a period of a fluctuation, that is how frequent the fluctuations are, will certainly impact the stability of a firm. After all, long-term fluctuations are merely trends.
Business Analysis Introduction: - Barilla has encountered many areas of their manufacturing and distribution processes that, for many reasons, could be vastly improved. To try to improve these areas, top logistics management decided to try to implement a JITD (just in time distribution) system, similar to VMI (vendor managed inventory). The management felt that they could cut back on problems such as wild demand swings and stock outs by using this method. Their distributors also felt a great deal of pressure to increase their inventory to prevent these stock outs while also ADDING items that they did not already carry, which would lead to even more inventory. Many employees in the logistics department thought the distributors should carry more inventory to deal with the stock outs but other knew the current inventory was already too much.
QRM is designed to make production systems more flexible and responsive to consumer demand with the help of utilizing concepts such as Just-In-Time and Cellular Manufacturing. Therefore, both inventory and working capital decreases which lowers the valuable cost of resources and capital. Traditional “batch” manufacturers develop complex long-term forecasts and manufacture based on these forecasts. This creates large inventories, inefficient use of capital and higher business risk due to variations and uncertainties. By producing in a just-in-time fashion, forecasts are scrapped and companies make to order.
Therefore, inflation occurs. When overall price level rose, consumers will start to plan to purchase more goods before the price rise even higher. Almost every consumer will purchase commodities in order to prevent buying the same product with a higher price in future. This will worsen the demand- pull inflation where the aggregate demand is more than the aggregate supply. Besides, if the government
Inventory Buffers In almost every type of business, there is variability in customer spending and demand is therefore constantly changing. This requires organisations to manage their inventories in a way that minimises holding costs while providing enough flexibility to meet customer demands. If inventory levels fall too low, businesses may have to pay overtime to produce products or lose out on revenue by making customers wait or shop somewhere else. Intelligent supply chain management systems typically include inventory buffer levels that are pre-determined with careful analysis of historical trends. Shipping
It maybe happens when income increase, people have ability to consumer some products and services which are not necessities. At this price, consumers want to buy more products, but suppliers just want to sale the quantity of products as before, the excess led to upward pressure on the price. It led to the rise of equilibrium price and