Manufacturing companies participating in a supply-chain initiative linking manufacturers and retailers recently made the following comments on the benefits of the initiative:
◆ “Receiving better information has allowed us to forecast and reduce inventory levels . . .”
◆ “You produce only what you need and that keeps the product and floor cost down.”
◆ “There is more accuracy with the retailer’s needs so that we can fine-tune our production scheduling.”
◆ “The inventory levels are lower and we have less waste by not overstocking the warehouses.”
Manufacturing companies highlighted the following information from retailers as most valuable to them:
◆ “We would like to see [the retailers] forward planning expectations of their sales.”
◆ “We could use retail store level data on a daily basis and better scanner information.”
◆ “Better forecasts, decisions about shelving and shelf allocations by retailers would help.”
◆ “I wish we had access to each retailer’s sales forecasts and the advertisements that they will be running next.”
REQUIRED
1. What are the major benefits from adopting a supply-chain approach? Use the comments above as a prompt to a more detailed discussion. Explain how these benefits can lead to increased operating income.
2. What are the key obstacles to a manufacturer adopting a supply-chain approach?