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in supply chains
Incentive Obstacles
When incentives offered to different
stages or participants in a supply chain
lead to actions that increase variability
and reduce total supply chain profits
misalignment of total supply chain
objectives and individual objectives
Local optimization within functions or
stages of a supply chain
Sales force incentives
Contributing factors
Incentives based on sell-in
leading to forward buy
Counter Measures
Focus sales force on
increasing sell-thru
Incentives based on rolling
horizon
Sales force do not compete
with each other but with the
competition
Contributing factors
Counter Measures
State of Practice
Sell-thru data in contracts (e.g., HP,
Apple, IBM)
CFAR, CPFR, CRP, VMI (P&G and
Walmart)
Quick Response Mfg. Strategy
Contributing factors
High Order Cost
Full TL economies
Random or correlated ordering
Counter Measures
EDI & Computer Assisted Ordering
(CAO)
Discounted on Assorted Truckload,
consolidated by 3rd party logistics
Regular delivery appointment
Volume and not lot size discounts
State of Practice
McKesson, Nabisco, ...
3rd party logistics in Europe,
emerging in the U.S.
P&G
Counter Measures
State of Practice
Saturn, HP
Schedule Sharing (HP with TI and Motorola)
HP, Sun, Seagate
Pricing Obstacles
When pricing policies for a
product lead to an increase
in variability of orders placed
Lot-size based quantity
decisions
Price fluctuations (resulting
in forward buying)
Contributing factors
High-Low Pricing leading to
forward buy
Delivery and Purchase not
synchronized
Counter Measures
EDLP
Limited purchase quantities
Scan based promotions
State of Practice
P&G (resisted by some retailers)
Scan based promotion
Behavioral Obstacles
Contributing factors
Lack of trust
Local reaction
Counter Measures
Building trust and partnership
State of Practice
Wal-Mart and P&G with CPFR
Building strategic partnerships and trust easier to implement these approaches if there is trust
Process-based view
Trust and cooperation are built up over time as a result of a series of interactions
Positive interactions strengthen the belief in cooperation of other party
Organizations Dependence
High
Low
High Level of
Interdependence
Partner
Relatively
Powerful
Effective Relationship
Low Level of
Interdependence
Low
Organization
Relatively
Powerful
High
Partners Dependence