IMPACT OF UNCERTANITY ON NETWORK DESIGN
• Uncertainty significantly impacts supply chain network design
by introducing variability and unpredictability, affecting decisions related to
facility location, capacity planning, and inventory management.
•Sources of uncertainty include demand fluctuations, supply disruptions,
changing customer preferences, and regulatory changes.
•Strategies for managing uncertainty involve scenario analysis, building
redundancy and flexibility into the network, using data analytics,
collaborating with stakeholders, conducting continuous improvement and
regular risk assessments, and considering new technologies.
What is demand planning?
Why is demand planning
important?
DEMAND PLANNING PROCESS OF SUPPLY CHAIN MANAGEMENT (BONDE AND HVOLBY, 2005)
Multi-location inventory management
• Multi-location inventory management within Supply Chain Management (SCM) is the
process of managing inventory across multiple physical locations, such as warehouses,
retail stores, or distribution centers, to ensure optimal stock levels and meet demand
while minimizing costs
Key Aspects of Multi-Location Inventory Management:
• Tracking Inventory:
Accurately tracking inventory levels at each location is crucial to understand what's
available and where it is located.
• Demand Forecasting:
Predicting future demand at each location helps determine how much inventory to
maintain and when to replenish.
• Inventory Optimization:
Finding the right balance between holding costs and the risk of stock outs or overstocking
is a key objective.
• Coordination and Communication:
Efficient communication and coordination between different locations are essential for
smooth inventory management.
• Automation and Technology:
Using technology, such as inventory management software and barcode scanning, can
streamline processes and improve accuracy.
When do you need multi-location
inventory management?
1. If a business has more than one retail location, it usually needs another warehouse. There’s some exceptions–
if both locations are close enough, you can sometimes get away with just one warehouse. However, close
proximity like this can lead to other issues.
2. For example, if both locations are too close to each other, they’ll end up competing with each other for
business. This is fine for large retail chains with billions of dollars backing them up but not for smaller
businesses that run on finer margins.
3. There are also more nuanced instances where multi-location inventory management makes sense. If a
business carries many different products of different sizes, it could be worth separating them in different
warehouses. The closer warehouse would store the higher-demand products, while the further one would
store lower-demand products.
4. This makes it easier to keep up with demand as long as you can manage things correctly. However, instances
like this are the exception rather than the norm.
SCM – Pricing & Revenue Management
Pricing is a factor that gears up profits in supply chain through an appropriate match
of supply and demand.
Revenue management can be defined as the application of pricing to increase the
profit produced from a limited supply of supply chain assets.
Ideas from revenue management recommend that a company should first use pricing
to maintain balance between the supply and demand and should think of further
investing or eliminating assets only after the balance is maintained.
Revenue management plays a major role in
supply chain and has a share of credit in the
profitability of supply chain when one or
more of the following conditions exist:
The product value differs in different market
segments
The product is highly perishable or product
tends to be defective.
Demand has seasonal and other peaks.
The product is sold both in bulk and the spot
market
Revenue Management For Multiple
Customer Segments
1. In the concept of revenue management, we need to take care of two fundamental issues.
2. The first one is how to distinguish between two segments and design their pricing to make one segment pay more
than the other. Secondly, how to control the demand so that the lower price segment does not use the complete asset
that is available.
3. To gain completely from revenue management, the manufacturer needs to minimize the volume of capacity devoted
to lower price segment even if enough demand is available from the lower price segment to utilize the complete
volume. Here, the general trade-off is in between placing an order from a lower price or waiting for a high price to
arrive later on.
4. These types of situations invite risks like spoilage and spill. Spoilage appears when volumes of goods are wasted due
to demand from high rate that does not materialize. Similarly, spill appears if higher rate segments need to be
rejected due to the commitment of volume goods given to the lower price segment.
Revenue Management For Perishable Assets
• Any asset that loses its value in due course of time is considered as a
perishable item, for example, all fruits, vegetables and
pharmaceuticals.
• We can also include computers, cell phones, fashion apparels, etc.;
whatever loses its value after the launch of new model is considered as
perishable.
• We use two approaches for perishable assets in the revenue
management
Revenue Management For Seasonal Demands
• One of the major applications of revenue management can be seen in the
seasonal demand. Here we see a demand shift from the peak to the off-peak
duration; hence a better balance can be maintained between supply and
demand.
• It also generates higher overall profit.
• The commonly used effective and efficient revenue management
approach to cope with seasonal demand is to demand higher price during
peak time duration and a lower price during off-peak time duration.
• This approach leads to transferring demand from peak to off-peak period.
Revenue Management For Bulk And
Spot Demands
1. When we talk about managing revenue for bulk and spot demand, the
basic trade-off is somewhat congruent to that of revenue management
for multiple customer segments.
2. The company has to make a decision regarding the quantity of asset to
be booked for spot market, which is higher price.
3. The booked quantity will depend upon the differences in order between
the spot market and the bulk sale, along with the distribution of demand
from the spot market.
4. There is a similar situation for the client who tends to make the buying
decision for production, warehousing and transportation assets.