Podcast
Questions and Answers
What are two common pricing obstacles that lead to variability in order placements?
What are two common pricing obstacles that lead to variability in order placements?
Lot-size based quantity decisions and price fluctuations.
How do behavioral obstacles create information distortion within an organization?
How do behavioral obstacles create information distortion within an organization?
Each stage of the supply chain views its actions locally and fails to see their impact on others.
What is one key managerial lever that can be used to achieve better coordination in a supply chain?
What is one key managerial lever that can be used to achieve better coordination in a supply chain?
Aligning goals and incentives among supply chain partners.
What role do trust and strategic partnerships play in supply chain management?
What role do trust and strategic partnerships play in supply chain management?
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Identify one consequence of different stages of the supply chain blaming each other for fluctuations.
Identify one consequence of different stages of the supply chain blaming each other for fluctuations.
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What is an effective pricing strategy that can help stabilize order placements?
What is an effective pricing strategy that can help stabilize order placements?
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In what way does improving information accuracy contribute to overcoming operational obstacles?
In what way does improving information accuracy contribute to overcoming operational obstacles?
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How can improving operational performance impact the supply chain?
How can improving operational performance impact the supply chain?
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What are the main goals of aligning incentives across supply chain participants?
What are the main goals of aligning incentives across supply chain participants?
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How does pricing for coordination affect supply chain performance?
How does pricing for coordination affect supply chain performance?
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Why is it important to share customer demand data in a supply chain?
Why is it important to share customer demand data in a supply chain?
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What is the impact of the bullwhip effect in supply chains?
What is the impact of the bullwhip effect in supply chains?
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What operational performance improvements can be achieved through reducing replenishment lead times?
What operational performance improvements can be achieved through reducing replenishment lead times?
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How does rationing based on past sales help in supply chain management?
How does rationing based on past sales help in supply chain management?
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What role does collaborative forecasting play in improving information visibility?
What role does collaborative forecasting play in improving information visibility?
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What managerial lever can be affected by altering sales force incentives from sell-in to sell-through?
What managerial lever can be affected by altering sales force incentives from sell-in to sell-through?
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What are operational obstacles in a supply chain, and how can they affect order variability?
What are operational obstacles in a supply chain, and how can they affect order variability?
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Explain how pricing strategies can create obstacles within supply chain coordination.
Explain how pricing strategies can create obstacles within supply chain coordination.
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Describe how behavioral factors can act as obstacles in a supply chain. Give an example.
Describe how behavioral factors can act as obstacles in a supply chain. Give an example.
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What role does information visibility play in mitigating obstacles within a supply chain?
What role does information visibility play in mitigating obstacles within a supply chain?
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What are some examples of local optimization in a supply chain and its negative impact?
What are some examples of local optimization in a supply chain and its negative impact?
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How can forecasting based on orders and not on actual customer demand create information processing obstacles?
How can forecasting based on orders and not on actual customer demand create information processing obstacles?
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Identify a solution to overcome rationing and shortage gaming in supply chains.
Identify a solution to overcome rationing and shortage gaming in supply chains.
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Discuss the impact of large replenishment lead times as an operational obstacle.
Discuss the impact of large replenishment lead times as an operational obstacle.
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Study Notes
Pricing Obstacles
- Pricing policies can lead to increased variability in order placements.
- Key factors include lot-size decisions and price fluctuations.
Behavioral Obstacles
- Information distortion in organizations often arises due to:
- Local perspectives from each supply chain stage, hindering overall impact understanding.
- Reactive approaches to local situations instead of identifying root causes.
- Blame-shifting for fluctuations among supply chain participants.
- Lack of learning over time from past actions.
- Distrust among partners, leading to opportunistic behavior that harms overall performance.
Managerial Levers for Coordination
- Align goals and incentives across the supply chain.
- Enhance accuracy of information exchanged.
- Boost operational performance.
- Implement pricing strategies to stabilize order variability.
- Foster strategic partnerships and build trust among supply chain members.
Obstacles to Coordination
- Various obstacles hinder smooth supply chain coordination, including:
- Incentive Obstacles: Misaligned incentives that promote local optimization and reduce profits.
- Information Processing Obstacles: Demand information distortion causing increased variability.
- Operational Obstacles: Order placement and fulfillment processes that escalate variability.
Incentive Obstacles
- Incentives at different stages can lead to actions that increase order variability.
- Examples include local optimization and sales force incentives that do not account for overall supply chain health.
Information Processing Obstacles
- Demand information can become distorted across different stages, worsening order variability.
- Common issues include forecasting based on orders rather than actual customer demand and insufficient information sharing.
Operational Obstacles
- Operational practices may escalate order variability, such as:
- Large lot ordering.
- Extended replenishment lead times.
- Gaming behavior during rationing and shortages.
Aligning Goals and Incentives
- Ensure all participants work toward maximizing total supply chain profits by:
- Harmonizing goals across the supply chain.
- Aligning incentives within various functions.
- Transitioning sales force incentives towards sell-through metrics.
Improving Information Visibility and Accuracy
- Enhance information sharing regarding customer demand.
- Utilize collaborative forecasting and planning methods.
- Design control systems for replenishment, such as:
- Continuous Replenishment Programs (CRP).
- Vendor Managed Inventory (VMI).
Key Point
- Demand planning based on orders received can magnify fluctuations as one moves upstream from retailer to manufacturer.
- Forecasting based on end customer demand is advisable to mitigate these fluctuations.
Improving Operational Performance
- Strategies to enhance operational performance include:
- Reducing replenishment lead times.
- Minimizing lot sizes.
- Sharing past sales data to prevent gaming behaviors.
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Description
This quiz covers the challenges associated with pricing policies in business management, specifically focusing on how pricing can lead to increased order variability. It addresses concepts such as lot-size decisions and price fluctuations that influence strategic pricing. Test your understanding of these critical aspects of pricing strategy.