BUSSPP 0200 1st Edition Lecture 18Outline of Last Lecture I. Supply Chain Layout in Depth II. What Holds the Chain Together? III. Markets Experience Instability IV. Responses to Instability Outline of Current Lecture I. Marketing Perspective of Push & Pull II. Operational Perspective of Push & Pull Current LectureI. Push & Pull – Marketing Perspective A. Recall general supply chain layout B. Main focus: To whom (what party) does one particular player direct their promotion mix? 1. Consider Manufacturer (i.e. Matel Toys) 2. No wholesaler a. Could direct promotion mix to retailer i. Retailer would then direct promotion mix to end user b. Could direct promotion mix to end user ii. Kids scream, moms demand from the retailer C. At one time pharmaceuticals could not be advertised directly to end users 1. Once this law was lifted – begin the era of drug commercials a. people go to their doctors: “I need _____” D. Push: directing promotion mix downward 1. Pull: end user’s response of demanding from upstream II. Push & Pull – Operational Perspective A. Estimation of demand 1. Issues with actual demand a. excess inventory b. stockout 2. What if we didn’t have to estimate demand? These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.B. Manufacturer: what if I don’t do anything until I receive an order from the retailer? 1. Retailer: well then I’m not ordering anything until the end user orders it. 2. Upstream players use the same logic 1. Push: estimating demand a. Pull: actual demand b. In order for this kind of a system to work, each player must work extremely close to the others C. We’re back to special relationships to make this work 1. Ex: Toyota production system 2. 4 different platforms, 4 body styles, 2 trim packages, 2 engines, 10 paint colors, 5 interior choices a. estimating demand for this is ridiculous b. cut down production/shipping/delivery time to 3-4 weeks, customer won’t notice a difference, but we eliminate MANY problems c. This system must be very carefully orchestrated 3. Canon 4. Lincoln Electric D. This is a PULL (Kanban, lean manufacturing, Japanese Manufacturing System, or agile) system – each player is pulling product from one player up 1. Virtually no finished product inventory anywhere in the system a. all intermediate inventory is constantly in motion – nothing is sitting around waiting 2. TPS – Toyota production system 3. JIT – just in time system 4. NONE of this will happen if solid trust is not established between players a. critical to relocation of a manufacturing facility is the establishment of new partners/coercion of old partners to co-locate b. expect to see the emergence of closely related upstream partners with the emergence of manufacturers 5. Increasing delivery frequency of intermediate/raw material product allows for more concise control of stock & inventory a. Inventory amount moves closer and closer to 0 b. Delivery costs go up, but storage costs go way down 6. Benefits are significant: every player reduces inventory a. PROBLEM: any issue upstream produces massive problems downstream b. shocks that cannot be controlled by the trust system cause serious problems7. Significantly greater efficiency traded for the fragility of the system to any disruption E. PUSH system – typical estimation of demand
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