Week6 Assignment

Running head : Supply chain coordination

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Effects of price fluctuation and trade promotions on supply chain coordination

Trade promotions offered by manufactures and distributors , for instance , quantity discounts , price reductions , rebates and coupons make buyers undertake forward buying . Forward buying is the purchase of items whose time of utilization is due mostly owing to price fluctuations occasioning attractive prices . Another form of price reduction results when manufacturers offer trade promotion schemes like trade special discounts , payment terms and price terms to their

customers . Customers purchasing behavior does not reflect immediate needs but rather they buy commodities to stock up for future use

Customers buy more when commodity prices are down and reduce purchases when prices soar . Customers ' buying behaviors doesn 't imply consumption patterns (Wade , 2004 ,

.23 . A situation called the bull-whip effect results when fluctuations in purchasing quantities are larger than fluctuations of consumption levels . Demand data of supply chains is disfigured by the bull-whip effect

Failure to forecast distribution stage sales could force firms to use sales or customer s data to manage inventory , schedule capacity predict on products and plan production . The big fluctuations are a hindrance to effective management . Some problems due to this phenomenon include : wrong product estimations , excessive or less capacity , wanting customer service owing to absent products or uncertain production scheduling . Many revisions translating into higher overheads resulting from overtime pay and fast-tracked shipment are incurred . HP experience similar consequences due to fluctuations which led to more...