RSM370H1 Lecture Notes - Lecture 11: Hockey Stick, Lead Time
Document Summary
Information uncertainty: comes from within supply chain, does not have to do with consumer in end-market, arises because players higher up in supply chain are further away from consumer demand. Bullwhip effect: small shock in consumer market becomes larger variation as we move further up supply chain, small fluctuation in consumer market results in large fluctuation further upstream, bullwhip effect is bad because fluctuation is costly. Ideally, we want supply chain to be like water flowing through pipeline. Discounts on assorted truckload, consolidated by 3rd party logistics company. Volume instead of lot size discounts, ideally over rolling horizon. Edi and computer assisted ordering for upstream parties to process order faster and aggregate orders through third party logistics company to avoid needing full truckload: spread out ordering by customers. Short term trade promotions create artificial fluctuation in order size. High-low pricing leading to forward buying: such as due to trade promotion, counter measures: Promote to end customer instead of retailer.
