Suboptimal supply chain performance occurs because … - Each firm makes decisions
ID: 423108 • Letter: S
Question
Suboptimal supply chain performance occurs because … - Each firm makes decisions based on their own margin, not the supply chain’s margin. - This is called double marginalization. A typical example of double marginalization is when, within one conglomerate of many companies where each company is a profit center, maximizing the profit of one company can hurt the profit of another. Say, for example, that one company within the conglomerate sells screens to the company which makes VR headsets. If the price for the screens is set too high (to maximize the profit center for the screen company), then the VR headset company could face price competition and see its profits fall. 3. Given the following supply chain made up of a manufacturer and a supplier: Demand is normally distributed with mean = 500 and standard deviation = 100 3c. Which statement is correct? Select one: a. The supplier would like the buyer to order less. b. The supplier would like the buyer to order more. c. The situation is optimized.
Explanation / Answer
Answer:
Mean demand =500 and std deviation=100
The coefficient of variance = (std. dev/mean) = (100/500) =20%
The value for CV is comparatively high but less than 50%. Although the order pattern is not very much predictable inventory can be replenished using rate based inventory fulfilment method.Considering the lead time, volume handled and CV approprate decision can be taken.With this kind of CV holding too much of inventory might not be a good idea. Only in cases where CV is >=100%, Kanban technique would be most appropriate. For the scenario given the situation seems to be optimised.