Abc Company

Team Five

Case II

Executive Summary

ABC Company is experiencing demand spikes during the last few days of each quarter. They seem to have no demand management team to take control of their supply chain. Sales teams push the product that they feel they need to sell without any concern or input from the production team. They also do not communicate with the supply management team to see if what they are selling is feasible and if they have the raw materials to produce more if the warehouse is emptied by these sales. By increasing communication between marketing and production ABC will be able to reduce the demand variability. ABC Company’s present condition is causing the unnecessary cost throughout the supply chain. The creation of a new matrix will give new insight into ABC’s current production dilemma.

The ABC Company must look at what is causing this demand volatility. It is clear that the demand volatility is being caused by the sales force offering incentives at the end of the quarter to increase the sales numbers. By recognizing the reason for the demand volatility steps can be taken to minimize demand volatility that is a result on internal reasons. By pushing sales at the end of the month with special promotions and pricing sales are peaking at the end of the quarter. This means the downstream member is buying enough goods to make it through to the next promotion at the end of the quarter. The cycle must be broken, and replaced with a system that does not encourage bulk buys at the end of the quarter. For this to occur there must be a normal quarter in order to obtain a forecast baseline. By “normal quarter” we are proposing a period without end of quarter incentives. There is absolutely no way to forecast demand while the sales team makes decisions without communication. Without previous data on normal production cycles there is no way of knowing exactly what must be made to keep track of the company’s profitability. ABC Company must have a proper forecast in order to track short-term profits.

Customer service is being affected negatively because ABC Company is unable to meet the demand during the end of quarter sales peak. This will cause a loss in goodwill when products do not ship and the downstream member does not have the product that was ordered.

B/c the ABC company is artificially pulling demand in order to meet their sales targets at the end of the quarter, there is a negative impact on the customer service level. It seems like the sales team procrastinates majority of the month only to apply pressure not only to themselves but to the warehouses. Then the sales team blames the warehousing dept for not delivering the product. The retailers are only ordering when promotions are being which seems to only be at the end of the quarter. By doing this, the ABC Company is losing business and rapport throughout the beginning and middle of the quarter. Retailers are ordering from companies who are offering promotions periodically. The ABC company needs to offer their retailers promotions periodically for two reasons: one, it will give them the reputation they need to keep their current customers as well as attain new customers. And two, b/c it will eliminate their artificial demand they have created for themselves at the end of every quarter.

Perhaps the entire sales team should be separated in to three teams, one to develop strategies for new products to be introduced into the market, a second team to work with the warehousing dept, and a third team to work with promoting the products on a regular basis. The third sales team would work in providing promotions periodically rather then at the end of every quarter. By doing this, the sales team can eliminate their artificial demand to the retailers.

Value propositions represent the attributes that supplying companies provide, through their products and services, to create loyalty and satisfaction in targeted customer segments. ABC Company’s lack of ability to provide products is producing a negative perception on the company. Downstream members are waiting to buy large amounts of goods and ABC Company is having difficulty supplying ordered products. This inability to supply the ordered products will cause customers to have a negative feeling about the company. If the products cannot be supplied some customers will look elsewhere for more reliability. One of the major problems is that the sales department is taking in more orders than warehousing can deliver. This is a result of producing an artificial peak in demand at the end of each month. All of the difficulties ABC Company is experiencing with customer service is brought on by internally produced conditions. The demand for the goods is relatively constant unlike the present demand. Because of marketing and sales requirement to increase quarterly profit, customer service will continue to suffer. This can have a devastating effect downstream where customers at the retail level, order a product then because of communication problems several tiers upstream have it arrive late or not at all. End result, customer under these circumstances would most likely switch to another company.

Because of the volatility in demand, production schedules will be very erratic. Labor will be idle during the slow times and overtime and temporary workers may need to be brought in during the end of the quarter. This is both costly and wasteful for ABC Company. Upstream suppliers will also feel the results of this demand volatility and will experience the peaks and troughs brought on by the highly erratic demand.

The constant introduction of new products is wreaking havoc on the entire company. The firm has absolutely no way of forecasting production due to its over zealous sales team. While the sales team decides what product they would like to put on special and toss out the door they are not communicating their plans with the production teams. In this situation even if the company had implemented some type of demand tracking to achieve an accurate forecast would be impossible. The sales team should at the very least pass along the bargain of the quarter to the rest of the company with as much advanced notice as possible and let production or demand management dictate the right product that is in need of being pushed on their clients.

Production scheduling is even trickier to accomplish since the production, demand management, and supplier management teams seem to be constantly adding new products to their vast array of existing products. While entertaining for the designers of the new products, it is impossible to keep the production of new products steady and allow