A Budo saying goes “A single speck of dust in the eye can make the three worlds look very narrow; free your mind and live unhindered!” Although the meaning of these words can be interpreted quite freely, there is no doubt that their essence boils down to making decisions based on information that is not disturbed by anything.
Functioning in the supply chain is based on the exchange of information with our contractors, i.e. customers and suppliers. But how often do we (not) share our forecasts and stock projections while looking ahead blindfolded, and thus making suboptimal decisions?
Well known in logistics, the bullwhip effect is mainly rooted in the lack of timely transmission of information going from the bottom of the supply chain to the top. As a result, decisions made are based on analysis of outdated and deformed demand signals. This leads to out-of-stock situations in some assortment groups and, at the same time, overstock in other groups throughout the supply chain. All supply chain partners lose out as a result of lower sales and rising costs. As a result, they become less competitive and begin to drop out of the market.
To significantly reduce this deficiency, all you need to do is increase the frequency of generating forecasts and analysis of future inventory projections, while communicating your needs with your upstream partners.
The accuracy of forecasts and inventory projections can be further improved by sharing information with each other about future promotions, participation in sales-boosting events, etc. Each such piece of information removes another speck of dust from our eye and allows us to make better decisions.
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