Challenges for Logistics and Supply Chain Management in Slowdown
CHALLENGES FOR LOGISTIC & SUPPLY CHAIN MANAGEMENT IN SLOWDOWN
A distinct feature of this economic slowdown is the direct degradation of consumer’s assets which has wiped out hundreds of billions of dollars in wealth. And consumers have responded by spending conservatively and concentrating on improving their savings. This new era of low spending and unpredictable consumer behaviour has rendered many demand-forecasting models inaccurate or even obsolete. Therefore, companies across the world are facing the problem of reduced demand levels. The variation in demand levels can mean any or all the three of the following to the supply chain of the firm: A. Bullwhip Effect The customer demand information is distorted as it is transmitted up to the supply chain and the variation in customer demand causes much wider variation in supply chain and its intensity increases down the way through supply chain. This bullwhip effect causes tremendous inefficiencies: excessive inventory, poor customer service, misguided capacity plans and missed production schedules. The major challenges that firms would face under such a situation would be to be able to take quick decisions relating to purchases and inventory levels and to be able to build flexible manufacturing systems so that demand variability can be handled without great losses. B. Intense Competition With lower consumer demand, all the firms will be going after a small number of customers thereby intensifying the competition. Developing newer and more innovative strategies will be a challenge for firms to cope up with this issue. Extending collaboration beyond organizational boundaries to effectively work with partners, suppliers, customers and even competitors will be form the major part of this challenge. All this should be done without compromising on customer service.
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C. Low Supplier Performance & Supplier Risk Suppliers generally get paid 45 to 60 days after delivering parts, and this may cause a wave of failures
A distinct feature of this economic slowdown is the direct degradation of consumer’s assets which has wiped out hundreds of billions of dollars in wealth. And consumers have responded by spending conservatively and concentrating on improving their savings. This new era of low spending and unpredictable consumer behaviour has rendered many demand-forecasting models inaccurate or even obsolete. Therefore, companies across the world are facing the problem of reduced demand levels. The variation in demand levels can mean any or all the three of the following to the supply chain of the firm: A. Bullwhip Effect The customer demand information is distorted as it is transmitted up to the supply chain and the variation in customer demand causes much wider variation in supply chain and its intensity increases down the way through supply chain. This bullwhip effect causes tremendous inefficiencies: excessive inventory, poor customer service, misguided capacity plans and missed production schedules. The major challenges that firms would face under such a situation would be to be able to take quick decisions relating to purchases and inventory levels and to be able to build flexible manufacturing systems so that demand variability can be handled without great losses. B. Intense Competition With lower consumer demand, all the firms will be going after a small number of customers thereby intensifying the competition. Developing newer and more innovative strategies will be a challenge for firms to cope up with this issue. Extending collaboration beyond organizational boundaries to effectively work with partners, suppliers, customers and even competitors will be form the major part of this challenge. All this should be done without compromising on customer service.
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C. Low Supplier Performance & Supplier Risk Suppliers generally get paid 45 to 60 days after delivering parts, and this may cause a wave of failures
References: 1496) 10 REFERENCES 1. BIBLIOGRAPHY: a. Modeling the supply chain, Jeremy F. Shapiro b. Supply Chain Vector, Daniel L. Gardner c. Application of SCOR Model in Supply Chain Management, Rolf G. Poluha 2. RESEARCH ARTICLES: a. Measuring Efficiency of Supply Chain, December 2007, Pravir Jana, Prof. A.S. Narang and Dr. Alistair Knox b. Freeing up cash from operations, December 2008, Mckinsey Quaterly 3. WEBLIOGRAPHY: a. Data Source: www.finance.yahoo.com b. General Electric: www.ge.com c. Logistics Management: www.asq.org d. Business Publications: www.bnet.com APPENDIX