Home / Summaries / Supply chain logistics management / responsive-model-inventory

21st-Century Supply Chains - Responsiveness

Q: Information connectivity created the potential for developing responsive business models. Which two different business models. Describe the characteristics of these models.

Push or anticipatory business practice (traditional model): is driven by production based on market forecasting. Mistakes in forecast caused differences in what firms planned to do and what they were actually doing, with unplanned inventory as a result. Pull or responsive is based on the principle that customers first have to order something, before the firm starts to manufacture it. This is made possible by joint planning and rapid exchange of information they want, fast. There are less steps involved in the process than with the anticipatory model so the responsive model cost less in money and time.

4 important questions on 21st-Century Supply Chains - Responsiveness

Information connectivity created the potential for developing responsive business models.

Which two different business models. Describe the characteristics of these models.

Push or anticipatory business practice (traditional model): is driven by production based on market forecasting. Mistakes in forecast caused differences in what firms planned to do and what they were actually doing, with unplanned inventory as a result.
Pull or responsive is based on the principle that customers first have to order something, before the firm starts to manufacture it. This is made possible by joint planning and rapid exchange of information they want, fast. There are less steps involved in the process than with the anticipatory model so the responsive model cost less in money and time.

The responsive model is in many ways similar to the traditional Build - to - order manufacturing. What are the two important differences?

There are two important differences:
1. The time to execute is much shorter;
2. The degree of potential customization is higher.

What are advantages of Geographic postponement?

Preliminary risk of inventory deployment is partially eliminated;
Economy of scales is retained;
Lower inventory investments because all inventory is centrally located.

Important for geographic postponement is logistical system capability to process, transmit and deliver precise order requirements fast and precise, to be able to deliver very fast.

What are barriers to implementing responsive systems?

It is difficult to maintain planned profits when adopting responsive arrangements and it gives expectations from supply chain partners concerning continued sales and financial results.
Another barrier is the need to establish and sustain collaborative relationships because implementing the responsive strategy cannot be done without support and input of partners.