Is there any factor that may largely influence the storage of manufacturing? And what is the relationship between them? Jracking will now give you the answers(2/4):
Sales needs to meet different clients’requirements. The original requirements are passed from customers to material suppliers. So sales is the key point of storage management. Volatility and uncertainty of sales are two main factors that may affect storage management.
a) Volatility of Requirements
The best example of the influence of sales is bullwhip effect.
It refers to increasing swings in inventory in response to shifts in customer demand as one moves further up the supply chain. Bullwhip effect may cause many problems in business running, such as high inventory, more managing cost and tight cash flow.
To eliminate the bullwhip effect, the best way is to find solutions from customer demands. But in fact, it is very difficult to forecast customer’s buying habits and consumption pattern.
Procter Gamble and Wal-Mart once cooperated on a VMI project of diaper. It was found in one same area, the sales volume may greatly fluctuate even the infant number is steady. The deviation can be enlarged from customer to material supplier.
The range of fluctuation is determined by the length of bullswing. The fluctuation is greater when the swing is longer. If the swing can be shortened, the fluctuation can be well controlled. That means we should bring every part in spply-chain closer to each other.
As a supplier, the lead time should better to be long enough, so that they can prepare raw materials and start production upon the 100% confirmation of orders.
But the truth is most customers require very short lead lime which mean suppliers must prepare material in advance according to their prediction, or they can not meet the shipping date.
The obscureness and long time before making a deal result in the fluctuation in customers requirements and eventually affect company stock.