1999 Volume 7 Issue 1-2 Pages 91-114
Inefficiency of the supply chain appears when trade partners such as retailer, wholesaler and manufacturer intend to maximize their profit and execute their optimum order requirements.
This paper describes how trade partners’ behavior would create supply chain inefficiency by developing a model of the optimum order requirements where trade partners intend to maximize their profit, and analyzing the demand and supply balance between trade partners. Because the structure of the optimum order requirements differs by trade partners, the gaps between demand and supply appears to generate a supply chain inefficiency.
Four factors are identified which would inhibit supply chain optimization; (1) additivity of retail demand, (2) over expansion of demand in market growth period, (3) restraint of demand in market introduction period, and (4) inappropriate use of trade promotion would accelerate these negative impacts.
Six key success factors are identified which would improve supply chain optimization; (1) regional retail inventory management, (2) focus on selected retailers, (3) demand and echelon inventory information sharing, (4) Vendor Managed Inventory, (5)reinforcement of trade promotion in market introduction period and (6) restriction of trade promotion during matured market period.
