Coordination in Supply

Chain
CHAPTER 10
What we will learn in this Chapter

 Describe Supply Chain Coordination and bullwhip effect and

their effect
 Identify the causes of bullwhip effect and obstacles

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Lack of Supply Chain Coordination and the Bullwhip effect

 Supply Chain coordination improves if all stages of the chain take

actions that together increase total supply chain profits.
 Lack of coordination occurs either because different stages of the
supply chain have objectives that conflict or because information
moving between stages is delayed and distorted
 BULL WHIP EFFECT in which fluctuations in orders increase as they
move up the supply chain from retailers to wholesalers to
manufacturers to suppliers
Lack of Supply Chain Coordination and the Bullwhip effect
Lack of Supply Chain Coordination and the Bullwhip effect
Lack of Supply Chain Coordination and the Bullwhip effect
Lack of Supply Chain Coordination and the Bullwhip effect
The Effect on Performance of lack of coordination

 A supply chain lacks coordination if each stage optimizes only its

local objectives, without considering the impact on the complete chain
and this leads to change in:
 1. Manufacturing Cost
 2. Inventory Cost
 3. Replenishment lead time
 4. Transportation Cost
 5. Labor Cost for shipping and receiving
 6. Level of product availability
 7. Relationship across the supply chain
The Effect on Performance of lack of coordination
Obstacles to coordination in a supply chain

 Any factor that leads to either local optimization by different stages of

the supply chain, or an increase in information delay, distortion, and
variability within the supply chain, is obstacle to coordination.
 1. Incentive obstacles
 2. Information-processing obstacles
 3. Operational obstacles
 4. Pricing obstacles
 5. Behavioral obstacles
Achieving Coordination

Having identified obstacles to coordination, managers can Cope up with

Bullwhip effect by:
 1. Quantifying the bullwhip effect
 2. Get top management commitment for coordination
 3. Devote resources to coordination
 4. Focus on communication with other stages
 5. Try to achieve coordination in the entire SC network