In a Continuous Replenishment Program the Wholesaler or Manufacturer

Introduction

Module 3 concludes one major segment of the course and Module 4 begins another.  The readings and assignments during the last few weeks covered the principles of three primary topics: the supply chain concept, the Bullwhip Effect in supply chains, and inventory fundamentals.

Module 4 expands the scope of our inquiry to examine the challenges of applying supply chain concepts to the distribution-side problem of replenishing retail inventories. The business relationship between channel members (manufacturers, distributors, wholesalers, transporters, logistics service providers, retailers, etc.) in traditional distribution channels is generally classified as arm's-length. Each organization makes its own replenishment decisions (how much to order, when to order, product mix, safety stock levels, lead time implications, etc.) and owns the inventory it holds and presents for sale. As unbelievable as it might sound, typically no collaborative planning and little coordination with other members of the channel exist. The relationship between channel members tends to have an adversarial slant, with each member largely focused on obtaining the best financial arrangement on each transaction with the upstream and downstream members--i.e. look out for yourself!

With little or no information sharing and no collaborative planning, traditional distribution channels experience the most severe bullwhip-related impacts: significant information distortions, high supply chain costs, and low levels of service and product availability.

To address these performance issues, a class of supply chain programs and practices developed that move responsibility for making replenishment decisions to a smaller set of organizations (perhaps just one) in the distribution channel. Information necessary to make these decisions, such as sales, shipments, and inventory positions, is shared via integrated information technology--even some as antiquated as fax machines and Excel spreadsheets. These programs and practices operate under a variety of names, the most common being continuous replenishment programs (CRP), vendor-managed inventory (VMI), vendor-managed ordering (VMO), continuous product replenishment (CPR), supplier managed inventories (SMI), and Collaborative Planning Forecasting and Replenishment (CPFR).

As you might imagine, developing and implementing such programs presents a host of technical and relationship problems. The latter are often the most significant because they involve changes in control over inventory decision making and changes in job responsibilities, incentives, internal and external relationships, and perceived status. For Module 4 you will examine a proposal by Barilla SpA, an Italian pasta manufacturer, to implement a continuous replenishment program in a traditional distribution channel. This case demonstrates the traditional silo (or functional approach) while illustrating the problems and rewards of a more collaborative arrangement by spanning the SCOR processes of planning, manufacturing, delivering and a bit of sourcing. As you study the case, pay particular attention to the comparison of the integrated SCOR model vs. the more traditional functional approach.

As you will see, the proposal meets with stiff resistance, not only from Barilla's distributors, but also from within Barilla itself. The Barilla SpA case study is the first team collaborative case study exercise you will be undertaking. The first lesson in Module 4 contains the reading assignment, including the case study itself. Lesson 2 presents the case study questions and assignment directions. Lessons 3 and 4 are to be completed after the team case study has been presented.

 Media

1. View the following screencast: Supply Chain Coordination

Module Learning Objectives

After completing this module, you should be able to:

1. Illustrate the principal obstacles to achieving collaboration and coordination in a supply chain.
2. Assess the principal causes of variation in order patterns found throughout a supply chain and describe how each cause contributes to the order pattern variation.
3. Summarize the principal categories of cost impacted by poor coordination in a supply chain.
4. Propose the managerial actions that can be taken to facilitate coordination within a firm and collaboration throughout a supply chain.
5. Evaluate a continuous replenishment proposal from the perspectives of internal constituencies and external organizations in the supply chain.

Module Assignments

1. Carefully review the study materials for each lesson.
2. Complete the assignments that are indicated for each of the lessons. Assignment due dates are shown on the course schedule.
3. During Weeks 6-8, we will be studying the Barilla SpA case. Complete all lessons in Module 4 utilizing a team approach for assessing the case by studying the case and associated articles, developing submission papers (optional) or reaction papers (for those students who have this requirement), evaluating the case questions, preparing, reviewing, and submitting the case presentation, and actively participating in a discussion forum to "connect the dots" for this deliverable.
4. The recommended Case Road Map schedule for these lessons is provided on the right- hand menu.

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Source: https://courses.smeal.psu.edu/SCM800_ARAMCO/SCM800_aramco_module_4/2011/06/SCM800-DEV-M4.html

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