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Table of Contents

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importance of coordination in supply chain

02

Obstacles to coordination in a supply chain

03

Suggestions.

04

Bullwhip Effect

05

Factors that cause bullwhip effect

05

Collaborative Planning & Forecasted Replanishment (CPFR) model.

06

Refrences

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1. Coordination in supply chain


Coordination of supply chain means that each stage must take into the account its actions
which can effect the actions or performance of other stage. This coordination is important to
achieve competitive advantage but alos agility of the supply chain and increased supply chain
profit (remeber not only organizational profit it effects over all supply chain profitibility).
Coordination in supply chain reduces lead times as well. So we can say that supply chain
coordination at each level is important. It also helps and organization for accurate forcasting
and decision making which reduces cost and increases the quality and provides customers
what they demanded. Matching customer needs is the basic goal of any organization after
profitibilty off course. To match customers need there must be a coordination in supply chain
partners. It kepps all the stake holders of supply chain up-to-date with the progress and
ability of other supply chain members. Which further helps in combine planning for that
product so that they can do their duty on time and according to the demands. Coordination
among independent firms, such as raw-material suppliers, manufacturers, distributors, thirdparty logistics providers and retailers, is the key to attaining the flexibility necessary to
enable them to progressively improve logistics processes in response to rapidly changing
market conditions. So we can say good cordination in supply chain can effect any
organization in means of
lower inventory cost
Reduced lead times
Reduced transportation cost
Low loss and damage of goods while loading and off loading
High customer services
Information sharing
Collective learning about new phenomena
Incentive alignmnet

And vice versa in case of poor coordination in supply chain.

2. Obstacles to coordination in a supply chain

Incentive obstacles: local sub-optimization is a commonn and well known


incentive it is the case in which one member of a supply chain trys/works to
benifit it self only instead of providing benift to entire supply chain.

Sales Force incentive obstacle : Sales Force Incentives Improperly structured


sales force incentives are a significant obstacle to coordination in the supply
chain. In many firms, sales force incentives are based on the amount the sales
force sells during an evaluation period of a month or quarter. The sales typically
measured by a manufacturer are the quantity sold to distributors or retailers (sellin), not the quantity sold to final customers (sell-through).

Information processing obstacles. This obstacles means information was poorly


organized, managed and transfered in a supply chain which destorted the
information quality like customer demand could not reach the concerned member
in supply chain on time, or some members needed a information but it was not
availble at that time

Operational obstacles. operational errors are included in this obstacle which says
that order taking, order filling, order processing and placing are not up to the
mark which adversly effect the coordination For example, orders of larger sizes,
larger replenishment lead times, rationing and shortages can all mean orders are
unable to reflect true customer demand

Pricing obstacles: certain pricing decision and practices or factors that directly
effect the pricing of a product are also a reason to detach orders from actual
demand generated For example, a company may overbuy if its supplier offers a
discount on a larger lot of orders, or if its demand is exceptionally large, but
members in the upstream supply chain can't rely on these sales figures to forecast
future demand.

Behavioral obstacles. Its the obstacle which arises from inter personal behaviour
of supply chain members in which they quickly respond to local situations or
temporary problems while neglecting the root causes and permanent issues. They

may blame each other for fluctuations in local demand, resulting in loss of trust or
even turning themselves into mutual enemies.

Other obstacles may include

Forecasting Based on Orders and Not Customer Demand


Lack of Information Sharing
Large Replenishment Lead Times
Price Fluctuations

Suggestions.
In my suggestions bahavioral obstacles should be dealt on priority because it can cause loss of
your delicate information which that particular member have who is thinking to leave your
supply chain. And for that be in contact with each and every member of supply chain when
product is under construction find out the problems any member is having and try to solve that
problem with in the time frame. Secondly try to find out the sales in terms of sales through
( sales to the final customers) this would reduce the sales force incentive obstacle. PnG had
suffered from this sales force obstacle in last years. And finally they decided to measure the sales
in terms of sales through instead of sales in. Plan properly before you want to buy something
from a supplier even if a discount is offered over a large volume. Upgrade information system,
go for latest IT solutions os that information is kept, recorded, delivered and inpreted properly.
Align the incentives with the goals in this way every member would participate in his best
capacities to increase total supply chain profit. Secondly make sure that your members know that
functions or actions would be evaluated on basis of total supply chain profit instead of total cost
or local cost

3. Bullwhip Effect
Bullwhip effect may be regarded as lack of coordination in supply chain. It trickles down as
supply chains move down i.e. firms at the top of a supply chain face a much higher variance in
orders than firms facing retail demand causing bullwhip effect to rise. Bullwhip effect increases
supply chain costs by increasing

Manufacturing cost
Invetory cost
Replenishment lead time
Transportation cost
Labor cost for loading and off loading

It also decreases product availbility, damaging relationships across supply chain and
decreasing supply chain profitibilty

Factors that cause bullwhip effect

Forcast problems. if members in supply chain take/recieves orders on


basis of customers demand forcasts instead of actuall demand/sales. And
alonth with this members in supply chain do their own forcast for thier
operations and suppliers. Longer the lead times larger the forcast error
would be and larger the supply chain more the forcasting problmes would
be there.

Order size/ Order cost tradeoff customers try to place orders of large
lots as unit price in that order may reduce in result of large order size, and
order review and placement costs are compartively low as well as
compared to small order size. If daily demand is accumulated to make up
larger weekly orders, daily information will be lost and forecasts will
become less accurate.

Forward buying. Some customer over buy products if discounts are


offered on large purchases especially when there is large price fluctuation.
As clear thsi demand is not stable so it does not reflect the actuall demand
so this should not be considered while forcasting or evaluting sales.

New Product game: when ever new products are prmoted it is expected
that they would generate a higher profit . However, it is extremely difficult
to make accurate forecasts on such profits. Secondly, the technology of
production may not yet be stabilized and hence there is uncertainity in

supplies according to that product. Again this demand is not the actuall
demand. So do not consider this demand.
Some other factors casuing bulwhip effect are

Disorganization
Lack of information
Order batching
Price variations
Over-reactiong on backlogs
Neglecting to order just to reduce inventory
Lack of customers confidence.

4. Collaborative Planning & Forecasted Replanishment (CPFR) model.


A praactice of business which includes intelligence by mutiple members in supply chain for
planning and fullfilement of customers demand. In other words two or more parties
synchronise their data and set a standard to exchange their informations CPRF results in
Lower Inventories for Higher Profits
Improved Customer Service through Better Forecasting
Improved Return on Technology Investment
Lower logistic costs
Increased effeciency and effectiveness of supply chain.
Enhanced Relationship
Greater Sales
. CPFR includes 9 steps which are as follows
1. Develop Front End Agreement
2. Create the Joint Business Plan
3. Create the Sales Forecast
4. Identify Exceptions for Sales Forecast
5. Resolve/Collaborate on Exception Items
6. Create Order Forecast
7. Identify Exceptions for Order Forecast

8. Resolve/Collaborate on Exception Items


9. Order Generation
There are four collaboration activities in CPFR model lets discuss them briefly

Strategy and Planning: This collaboration activity provides basic ground rules for the
collaboration it determines the product mix their placement and develops event plans for

the next period of the manufatucrization.


Demand and Supply Management: This refers to the estimate of customers final
demand and orderinf of customers based on that demand. And requirements of shipment

of those orders over the planing time period.


Execution: As name shows its the implication of the above two activities which means
orders are placed accordingly, then shipments are placed and dispatched, ordered
products are recieved and stocked, recorded the sales transaction and final payments are

made.
Analysis: planing and execution are checked and evaluated for exceptions in this stage.
Results are aggrigated and performance is measured

Refrences:

Balakrishnan, Anantaram, and Geunes, Joseph, "Collaboration and Coordination in


Supply Chain Management and E-Commerce," Production and Operations Management,
Spring 2004.

(http://www.findarticles.com/p/articles/mi_qa3796/is_200404/ai_n9366598/)
Collaborative Planning, Forecasting, and Replenishment Research Paper Tuomas
Toiviainen & Jeffrey Hansen 2/2/2011 (http://www.scf.usc.edu/~jdhansen/CPFR

%20Research%20Paper.pdf)
CPFR collaborative planning, forecasting, and replenishment delivering results for
manufacturers serving the retail sector february 2003 by j.d edwards
(http://www.sccori.com/SCM/COLLABORATIVEPLANNINGFORECASTING.pdf)

Collaborative planning, forecasting and replenishment (CPFR) as a relational contract: an


incomplete contracting perspective by Sung Min Kim and Joseph T. Mahoney