The knowledge of Coordination for Supply Chain Integration

Presented by
Mohammad Habibur Rahman (2016-2-5-
003)
Sub: Supply Chain Management(TM-
563).
Dept. Textile Engineering Management
Welcome to the Presentation
on
‘’The Knowledge of Coordination for
Supply Chain Integration.’’
Submitted to
Md. Ahsan Habib Sir
Assistant Professor & Head,
Dept. of Textile Engineering Management
Bangladesh University of Textiles.

 Supply Chain:
A Supply Chain is a network of partners who collectively convert
a basic commodity into a finished product that is valued by end
customers and who manage returns at each stage. Each
Partners in a Supply Chain is responsible directly for a Process
that adds value to a product.
 Supply chain Management:
SCM is the control of the supply chain as a process from
supplier to manufacturer to wholesaler to retailer to
consumer. Supply chain management involves
coordinating and integrating these flows both within and
among companies. It is said that the ultimate goal of any
effective supply chain management system is to reduce
inventory (with the assumption that products are available
when needed).

 Supply Chain Coordination: aims at
improving supply chain performance by
aligning the plans and the objectives of
individual enterprises. It usually focuses on
inventory management and ordering decisions.
 Supply Chain Integration : is a close
alignment and coordination within a supply chain,
often with the use of shared management
information systems It is how everyone in the
company and its trading partners work in sync
to achieve the same business objectives via
integrated business process and information
sharing.

 Focus of Coordination:
The literature of the systems thinking also advocates that
the mutuality among chain members provides the
opportunity to focus on operational improvement that has
a dramatic impact in the overall chain performance.
Coordination will fail if the perception of mutuality for
other members to the system is absent.
Mutuality of coordination can be divided into two main
dimensions as Complementary of process and
coherency of understanding.

 A Taxonomy Coordination Modes in Supply Chain.

Coordination:
Coordination among independent firms such as raw
material suppliers, manufacturers, distributors, third
party, logistics providers and retailers is the key to
attaining the flexibility necessary to enable them to
progressively improve logistics processes in
response to rapidly changing market conditions. Poor
conditions among the chain members can cause
dysfunctional operational performance!!

 Coordination Modes:
Four coordination modes are identified based on the two
dimensions of coordination.
1. Logistics Synchronization.
2. Information Sharing.
3. Incentive alignment.
4.Collective Sharing.
Each Coordination mode has different contexts and
emphasizes different cognitive processes. The
coordination of Logistics synchronization is
responsible for ensuring alignment between logistics
process activities to deliver products and services to
full fill customers need and wants.

1. Logistics Synchronization:
Logistics Synchronization means recognizing and
concerting improvement initiatives that significantly
contribute to value creation the acquisition,
consumption and disposition of products and
services in today’s rapidly changing markets.
Logistics synchronization also assists participating
the members to resolve role conflict so that each
member can perform their specific tasks.

2. Information Sharing:
The coordination of Information sharing attempts to
make relevant , accurate and timely information
available to the decision makers. Chain Members often
have the different private information which is often not
shared with each others-Asymetric information is
inherent in Supply Chains. IT such as the internet ,
Software application Packages and decision support
system can be applied to facilitate the information
sharing with Customers and Partners to get the
optimum supply chain performance!

3. Incentive Alignment:
Incentives defined how decision makers are to be
awarded or penalized for the decision what they
make. Existing incentives influence individual
members behavior and its interaction with another
partners. We got from the practical world suggest
that Incentive alignment can motivate chain members
to satisfy customer needs and increase their total
profit.

4. Collective Learning:
The Coordination of collective learning deals with how
tackle the coherency problem of initiation and diffusion of
knowledge across organizational borders. Special
emphasis is placed on practical learning from one another
for understanding and creating tacit capability in
implementing particular logistics improvement initiatives.
The objectives of coordination of collective learning is to
extend each partners capability that is useful for
accomplishing ongoing improvement.

 The Recursive interplay between an integrated
Supply chain with the four coordination modes:

 Obstacles to Coordination in a Supply Chain
1.Information Processing Obstacles.
2.Operational Obstacles.
3.Pricing Obstacles.
4.Incentive Obstacles.
5.Behavioral Obstacles.

1.Information Processing Obstacles.
A supply chain with poorly organized or managed
information channels leads to deterioration in information
quality .
Example: information on customer demand cannot reach
members in a supply chain in a timely manner, or
information is not available to some members who might
need it.

2.Operational Obstacles.
Certain practices such as placing and filing orders may
have adverse effects on coordination.
Example: orders of larger sizes, larger replenishment
lead times, rationing and shortages can all mean
orders are unable to reflect true customer demand.

3. Pricing Obstacles.
Certain pricing practices and factors that affect pricing are also ways to
detach orders from actual demand.
Lot size-based discounts
Price fluctuations (e.g., due to promotions) resulting in “forward buying”.
Example: a company may overbuy if its supplier offers a discount on a
larger lot of orders, or if its demand is exceptionally large, but members in
the upstream supply chain can't rely on these sales figures to forecast future
demand.

4. Incentives Obstacles.
When incentives offered to different stages or participants
in a supply chain lead to actions that increase variability
and reduce total supply chain profits – misalignment of
total supply chain objectives and individual objectives
Local optimization within functions or stages of a supply
chain
Sales force incentives

5.Behavioral Obstacles.
It is highly likely that members in the supply
chain respond to local situations and neglect
root causes. They may blame each other for
fluctuations in local demand, resulting in loss of
trust or even turning themselves into mutual
enemies.

 The affect of Lack of Coordination on Performance.
1. Increase Manufacturing cost.
2. Increase Inventory cost.
3. Increase Replenishment lead time.
4. Create Bullwhip effect.
5. Increase Transportation cost.
6. Increase Labor cost for shipping and receiving.
7. Decreases Level of product availability.
8. Affect on Relationships across the supply chain.

 Managerial levels to achieve coordination.
1. Aligning goals and incentives.
2. Improving information accuracy.
3. Improving operational performance.
4. Designing pricing strategies to stabilize
orders.
5. Building strategic partnerships and trust.

1. Aligning Goals and Incentives
Align incentives so that each participant has an incentive
to do the things that will maximize total supply chain
profits.
Align incentives across functions Pricing for
coordination.
Alter sales force incentives from sell-in (to the retailer) to
sell-through (by the retailer).

2. Improving Information Accuracy.
1. Sharing point of sale data.
2. Collaborative forecasting and planning.
3. Single stage control of replenishment
Continuous replenishment programs
Vendor managed inventory (VMI).

3.Improving Operational Performance.
1. Reducing replenishment lead time.
2. Reduces uncertainty in demand.
3. Reducing lot sizes.
4. Computer-assisted ordering, B2B exchanges.
5. Shipping in sizes by combining shipments.
6. Changing customer ordering behavior.
7. Rationing based on past sales and sharing information to limit
gaming “Turn-and-earn”.
8. Information sharing.

4. Designing Price Strategies to Stabilize
Orders.
1. Encouraging retailers to order in smaller lots and reduce
forward buying.
2. Stabilizing pricing.
Eliminate promotions (everyday low pricing: EDLP).
3. Building strategic partnerships and trust – easier to
implement these approaches if there is trust.

5.Building Strategic Partnerships and Trust in
a Supply Chain.
1. Designing a Relationship with Cooperation and Trust.
2. Managing Supply Chain Relationships for
Cooperation and Trust.
3. Trust-based relationship.
4.Dependability.
5. Leap of faith.
6. Cooperation and trust work because:
7. Alignment of incentives and goals.
8. Actions to achieve coordination are easier to
implement
Greater information sharing results.

 Conclusion:
All players in a team will have to know where there is a
need for matching processes, information's,
capabilities to reach the Goal or larger visions. The
knowledge of Coordination is useful for bringing people
together to inquire into the key drivers of coordination
modes, identify obstacles and engage in joint problem
solving that the coordinated efforts provide larger
benefits than the individual can attain alone.

The knowledge of Coordination for Supply Chain Integration

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