The Traditional Replenishment Model Of Supply Chain System
The traditional replenishment model may cause either accumulation of inventory or shortage of inventory or even, ‘out of stock’. In order to solve this issue Eliyahu Goldratt proposed the new replenishment model of ‘pull-system’. Establishment of warehouse and integrating a new and appropriate technology may improve the company’s total distribution system. This paper tries to explain my company’s current distribution system and a solution that would help to improve its distribution system efficiency.
In the traditional supply chain system, the manufacturers or the upstream suppliers focus on meeting the customer demand as well as reducing the inventory to the minimum; at the same time customers expect goods to be delivered …show more content…
My company follows the traditional supply chain system where the upstream suppliers or the manufacturers get order for a certain number of goods from the retailers and the retailers sell them to the customers, but the upstream suppliers don’t know the number of actual number of product which has been sold out. Traditional supply chain system works on the basis of ‘push-system’. In order to avoid ‘out of stock’, retailers try to enhance their inventories more than the demand. At every level of the supply chain, i.e. retailers, wholesalers and suppliers, demand forecast resulting in “Bull-whip” effect”. The Bullwhip effect will cause the following adverse …show more content…
Customers often may not buy the same product
2. Excessive inventory can cause rejected inventory or dead stocks
3. The distribution centre may not send the goods ordered by retailers on time.
4. Best sellers often get ‘out of stock’ and non best sellers may accumulate
5. The product supply to the warehouse or the distribution centre may not consistent with the actual demand.
Image1. shows the conflict graph in traditional supply chain management (Goldratt, 1994).
Overall, in traditional supply chain, push system may end up with lost or low sales, accumulation of inventories and unresponsiveness, which will cause a great loss to the company. There for in my company the replenishment mechanism appears to be very important to improve the company’s distribution system. As my company suffers the adverse effects of the push system as mentioned above I would like to suggest implementing Goldratt’s replenishment approach in the distribution system. Image 2 shows the traditional replenishment method.
Image2. Traditional Replenishment method
1. Goldratt’s replenishment