Assignment 5 Essay Example | Topics and Well Written Essays - 1500 words

Assignment 5 - Essay Example â€Å"Bullwhip effect describes how inaccurate information, a lack of transparency throughout the supply chain, and disconnect between production and real-time supply chain information result in lost revenue, bad customer service, high inventory levels and unrealized profits† (Paritosh Agarwal, 2009). The Bullwhip effect can be minimized by studying the drivers of demand and supply patterns. Moreover, companies should try to reduce the cycle time, ensure smooth and quick flow of information and take corrective actions to reduce the impacts of price fluctuations, inaccurate demand forecasts and order batching. Question 2: explain why Volvo manufacturing department believed that customers had started to like green cars in the mid 1990’s. Answer: the demand and supply variations at Volvo resulted in huge stocks of unsold green cars. The overproduction of cars can have a potential impact on unrealized revenues and excessive cost for storing the cars. Therefore, the company planned to offer incentives in order to increase the demand of green cars. On one hand the company was successfully able to sell the excess stock which resulted in the revenue realization of the green cars. However, the production department misinterpreted the sales record and started ordering excessive raw materials in order to produce more cars. This inaccurate assessment of the situation can have a multiplier effect on the profits and production capacity. In future, the company will again have to offer some incentives and attractive deals to deal with the overproduction of cars which will not only reduce the profit margins but it will also lead to increased workload and decline in quality caused by 100% capacity utilization. SUPPLY CHAIN MANAGEMENT AT WAL-MART. Question 3: Discuss how the Bullwhip effect can be reduced. Explain how Wal-Mart uses IT to reduce the Bullwhip Effect. Answer: the Bullwhip effect can be controlled by accurately forecasting demand by gathering the real-t ime information, which can be acquired by working closely with suppliers and distributors. The regular flow of information combined with the proper management of sales and inventory growth can be helpful in attaining the proposed financial results. From a different perspective, all the parties involved in the supply-chain management process are mutually dependent on each other and they can significantly influence the rest of the industry players with their actions. Therefore suppliers, distributors, production department and customer relationship department should work in coordination with each other in order to improve the business-customers sales record. Apart from this, organizations should try to improve the downstream communication by using the point of sales (POS) data collection method and vendor-managed inventories (VOI) so that demand is not over/under estimated. Also, price fluctuations caused by various discount offers can create variability in demand; therefore, every da y low price (EDLP) should be used to keep the prices stable. Moreover, cycle time should be reduced to make the availability of the product faster and easier and â€Å"order capacity reservations† could be used by production department so that the retailers reserve a specific quantity of items to be purchased in a given time frame which will help to keep the distributor’