3. Information is a key supply chain flow. i. What are the other two principal f

Question

3. Information is a key supply chain flow. i. What are the other two principal flows in the supply chain? (5 marks) li. Are sales volume incentives offered to sales staff in the supply chain likely to make Bullwhip Effects smaller or larger? Explain your answer. (10 marks) Provide an example of a credence good (that is, a good with valuable attributes that are not observable to the consumer even after purchase and consumption) that you are familiar with. Outine the information-related needs of its supply chain and describe how they are met. (10 marks) ili.

Explanation / Answer

1. Two principal flows are:

a. Product flow: It refers to the flow of products from the supplier to the customer and also the reverse flow of return products from the customers to the supplier. Typically a supply chain involves manufacturers, wholesalers, retailers and customers and the flow of products is among these stakeholders.

b. Information flow: Information flow refers to invoice generated by the supplier, purchase order generated by the customer, trading documents such as bill of lading, way bill etc and any other such documents required to complete transaction between supplier and customer.

2. Sales volume incentives are likely to make Bullwhip effect larger because the incentives depend upon the volume of sales; so when the sales volume will be higher, incentives will also be higher, sales staff will be motivated to perform even better resulting in even more sales. But when the sales volume is down, incentives will be down too, sales staff won't be motivated and sales will further reduce. This leads to inconsistent sales and larger Bullwhip effect.

3. Example of a credence good is as described below: Suppose a customer goes to a restaurant to eat meat. He chooses to eat meat which costs higher than other varieties of meat available. After he eats it, he is still not able to tell the value or importance of the meat he ate because he did not try the other varieties of meat. He chose the meat purely on the basis of its price.

Information related needs of supply chain of this meat is the price point and availability to the customer. If it suits the price that the customer is willing to pay in order to consume it, he will definitely buy it. Also availability is another aspect which needs to be considered. Generally there are repeat customers of credence goods and they consider short hand availability to be a major factor for their demand.

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