Information enrichment: designing the supply chain for competitive advantage

  1. Mason-Jones and D.R. Towill

Supply Chain Management

1997, Vol. 2, No. 4, p. 137-148

 

1)      Introduction

  1. a) Members within supply chains should work together seamlessly
  2. b) Pipeline: a mechanism by which materials and information flow through the supply chain.
  3. c) In many chains, the only player who knows the true demand is the retailer
  4. d) Market information is delayed and distorted as it flows through the supply chain
  5. i) Information ages and loses value
  6. ii) Old information causes amplifications, delay and overhead

2)      Information as a competitive advantage

  1. a) Major technology behind improved data flow: EDS
  2. i) Distortion and magnification still remain
  3. b) IT makes it possible to eliminate lead-time on information
  4. i) Constraint: the belief that Information is power to each individual company in the chain
  5. ii) Companies may deliberately distort information
  6. c) Information drives the supply chain
  7. i) Market sales data is the information catalyst
  8. ii) In a traditional supply chains, the retailer is the only player that has direct view of consumer demand

3)      The value of information

  1. a) Implementing IT is not enough
  2. i) It only transfers the same data faster
  3. ii) Management of information is the key
  4. b) Law of industrial dynamics
  5. i) If demand for products is transmitted along a series of inventories using stock control ordering, then the demand variation will increase with each transfer
  6. ii) Holding stock costs money, but excess can result in obsolescence
  7. c) Simulations
  8. i) The beer distribution game

(1)   Objective: to minimize cumulative costs of excess inventory and stock-outs over the length of the game

(2)   Information is distorted by lead time, transfer and subsequent product delivery

(3)   The presence of order magnification is evident

4)      The Information enriched supply chain

  1. a) Each player bases their order decision on the best combination of immediate internal sales and market sales data
  2. b) Simulation
  3. i) Order cycle time arbitrarily set at one week
  4. ii) Each process lag is set at four weeks

iii)     Simulation needs to establish how to use direct data in the order decision

5)      Dynamic response to a step input

  1. a) Improvement was initially assessed by
  2. i) the factory order rate
  3. ii) factory stock level patterns
  4. b) Direct information through information enrichment benefits:
  5. i) Production order control
  6. ii) Stock level control
  7. c) Delay of initial response is eradicated

6)      Dynamic response to a random marketplace demand

  1. a) Simulation
  2. i) Five competing designs were used with random consumer demand

(1)   100% information enrichment

(a)    not required to gain the most competitive advantage

(2)   75% information enrichment

(a)    offered equally good response as 100%

(b)   offers greatest opportunity for competitive advantage id some buffering of the factory process is vital

(3)   50% information enrichment

(4)   25% information enrichment

(5)   0% information enrichment

  1. ii) Forrester effect is evident

(1)   As total pipeline usage of direct market data is reduced, the system filters out the high frequency fluctuations of demand

iii)     Overall Key points

(1)   Use of undistorted data can improve stock levels and responsiveness

(2)   The comprehensive effect on the entire supply chain represents a strong competitive advantage

(3)   Impact of demand magnification is lessened