| (PREVIEW) Supply Chain Strategies I: Aligning Strategies; Efficiency and Cost Savings Module SCM102 |
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SCM102: Supply Chain Strategies I: Aligning Strategies; Efficiency and Cost Savings
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...When production materials or components are threatened to be in short supply, suppliers typically place them "on allocation", which means that suppliers distribute their limited inventory across all their downstream customers to make sure each one gets at least some of their order. Even if you ordered 10,000 monitors for January delivery, you may get only 5,000 due to shortages in availability. Allocation allows suppliers to meet some of the orders from all purchasers, so that no one is left with zero product. The idea is that giving everyone a portion of requirements is somehow better, in the long run, than giving some customers 100% of their orders and other customers nothing. Invariably, some people will over-order to compensate, particularly if the shortage becomes widely apparent. There are many examples of this behavior, particularly for industrial products and components... |