In every supply chain, demand forecasting drives other supply chain decisions such as inventory, production scheduling, and material requirements. Demand is forecasted based on order history of the immediate customers in the supply chain. When downstream member places an order, the upstream member processes that information as a signal about future product demand. Thereby the upstream member readjusts its demand forecasts and place orders to its supplier (Lee et al., 1997a; 1997b). As planning time (i.e., time taken for initial forecast and forecast adjustment) lengthens, sales forecast that guide the order no longer reflects current market condition (Stalk, 1988). The consequence of not being able to reflect market condition could be either excessive inventory or poor customer service due to unavailable products. Collecting demand data in the most effective and economical method possible and sharing that information with supply chain partners are critical for supply chain management (Smith & Wintermyer, 2000).

Long lead-time from order to delivery prohibits companies from being flexible and adapting quickly to market demand fluctuation. Innovative companies in different industries improve their supply chain performance by reducing the lead-time from order to delivery. As businesses recognize the importance of the supply chain performance, the focus on business process reengineering is extended to the inter-business process reengineering (IBPR). Also called as business network redesign (Venkatraman, 1994), IBPR represents the redesign of the nature of exchange among supply chain partners through effective deployment of IT capabilities.

As recently as 1996, distributors and sales representatives from Heineken USA would meet together to plan out orders three months ahead of delivery. It was a daunting task for them to predict the factors that would affect the product sales such as weather, special promotions, and local demand fluctuations in advance. This time consuming effort took up to three days per month to accomplish. Once an order was agreed upon, the district sales managers would fax the orders to Heineken USA headquarters, which in turn would send them to the brewery in Netherlands. Lead-time from order to delivery averaged 10 to 12 weeks (Weston, 1997), which is unacceptable for a company looking to become more flexible and adapt more quickly to market demand fluctuations (see Exhibit 2 for Old Distribution Process).

Annals of Cases on Information Technology
SQL Tips & Techniques (Miscellaneous)
EAN: 2147483647
Year: 2005
Pages: 367 © 2008-2017.
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