QSO 630 wk8 discussion response - 79957

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  • From: Business, Business
  • Due on: Sat 04 May, 2019 (08:59pm)
  • Asked on: Thu 02 May, 2019
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Michael Pray posted Apr 29, 2019 12:27 PM

Using a local or domestic supplier can lead to lead time reduction.  If the units are coming from a closer location, then there will be less risk from outside influence that could delay or prevent shipments form arriving.  Another method to reduce lead time would be placing smaller, more frequent orders in place of bulk orders.  Smaller orders can reduce carrying costs and actually show up sooner than bulk orders.


Transportation costs can change when there is any variability in lead time.  If lead time is reduced, then the option of single source or consolidated carriers can change the cost of transportation.  If the product is shipped on a truck load (TL) rather than a less than truck load (LTL) there should be the benefit of lower shipping rates for the full TL (Murray, 2018).  If companies throw out bids for a single source than carriers will compete and offer competitive rates that will also potentially reduce transportation costs (Murray, 2018). Another option to contemplate is improving forecasting techniques and information systems to reduce other components of lead time.  Information sharing and building a trustworthy partnership will enable this option to succeed. This in turn can make it so that it may not be essential to reduce the transportation component (Simchi-Levi, Kaminsky, Simchi-Levi, 2008).


Meghan Lanni posted May 1, 2019 9:35 PM

This may be my favorite topic of the class, it's essentially my daily job and conversation.  I work for a camera manufacturer, and we often will have extended lead times on products, which leads to a panic and reaction from our distributors, because their lead time to their customer has been extended.  We even have distributors that order to the extended lead time, so they order extra in the most recent month to be prepared for future months.  This makes forecasting a nightmare, because without a very tight collaboration with our distributors, we have a difficult time telling if the demand increase is true demand increase, or if it's the bullwhip effect.  We tend to be too conservative, keeping the forecast still low assuming much of the increase is bullwhip, but we have been burned by that a few times, where the demand was true channel demand, with customers waiting on it.  

Anyways, now to get to what we do about this lead time.  Much of this is on experience, but also some research I've done through Gartner articles that I don't have on hand any more.  They are a research company that does a great job discussing what to do about supply chain issues.  The article I have is a purchased article that I no longer have access to.  

Some practices we have are to prioritize direct customer orders distributors have over their stocking orders.  This helps with ensuring our customers are happy, regardless of the distributor stock.  Going up the chain, we often take much higher costs with our suppliers on shipping product to our logistics centers.  This includes flying product over having it go by truck or boat.  Another important aspect is to work with the suppliers on their priority.  Often, suppliers may not know the backlog a manufacturer has, or what their distributors are waiting on, so passing that information up stream on what they need to prioritize will help reduce the lead time.

The last trick we've tried, and probably the riskiest, we've actually reduced the lead time artificially, in the hopes that our customers stop panicking.  This decrease in panic will help alleviate the overload of orders, causing the snowball effect.  The other trick is to have one lead time to our distributors for their new orders, and have the distributors share the lead time for when they will have their existing backlog fulfilled and have stock.  This date is the most important for the end user, as they don't care about our lead time to the distributor, but rather when they will get the product.


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QSO 630 wk8 discussion response
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