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1. How can postponement of product differentiation be used to improve supply chainprofitability?

Postponement, also known as "delayed differentiation," is a supply

chain strategy that delays product differentiation at a point closer to the customer.

This involves designing and developing standard or generic configurable products that

can be customized quickly and inexpensively once actual consumer demand is known.Postponement also entails the implementation of specific inventory strategies to

deploy inventory farther away from the customer while fulfilling service level

objectives and reducing inventory costs and minimizing risks i.e., strategies for

holding the right inventory, at the right place, in the right form.

Postponement refers to the delay of product differentiation until closer

to the sale of the product. Postponement allows producers to leverage two features

common to forecasts: forecasts with shorter time horizons tend to be more accurate

than those with longer time horizons; and aggregate forecasts tend to be more

accurate than forecasts for individual items/models. Improved forecast accuracy

should result in a closer match between supply and demand, resulting in improvedprofitability. An improved match will result in lower levels of unplanned carryover

inventory and shortages at the end of planning periods. The improved match will

lower the expected costs of having too much or too little inventory.

Successful postponement implementations improve customer

satisfaction while minimizing inventory costs. By improving their ability to respond

to changes in demand from local and global markets, companies are better able to

compete on time while remaining cost competitive.

2) Describe the bullwhip phenomenon and how it can be destroyed?

The bullwhip effect is the uncertainty caused from distorted information

flowing up and down the supply chain.

Who is affected?

Nearly all industries are affected!

Firms that experience large variations in demand are at risk.

Firms that depend on suppliers upstream or distributors and retailers

downstream may be at risk.

Results of the bullwhip effect

Lost customer service

Lengthened lead time

Lost sales

Unnecessary adjusted capacity

Causes of the bullwhip effect

Un-forecasted sales promotions

Sales incentives

Lack of customer confidenceCustomers turning back sales orders

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Freight incentives

Bullwhip effect is caused from distortions in information along the

supply chain

Results of the bullwhip effect can include: excess inventories,

problems with quality, increased costs, overtime expenditures, lost customer

service, lost sales and more.Causes of the bullwhip effect may include: poor forecasting of sales,

incorrect information along the supply chain, sales incentives, sales

promotions and lack of customer confidence.

Solutions to the bullwhip effect include: improved information flow

between firms along the supply chain, stable pricing, small order increments,

focused demand on EDI or POS systems and removal of sales incentives.