A matter of Choice or a matter of chance 'Stock Price Protection and SCM' - Jerry Jerome Cedicci & Robin Trehan

In order to tackle Stock Price Protection, companies design their information system model & SCM in a manner so that there is minimum inventory at the distributors. This model tightens the distribution activities from a manufacturer to a supplier so that efficiencies in terms of accuracy, timeliness, cost effectiveness; exchange of knowledge among the partners may be achieved to create synchronized replenishment plans. In Collaborative Planning, Forecasting, and Replenishment (CPFR), both the buyer and the seller make use of the hub-spoke or internet based model to share forecasts, detect major variances, exchange ideas and collaborate to reconcile differences, so as to have a common forecast and replenishment plan.

Stock Price Protection has to do with balancing the risk of payment to distributors for the stock in case that the price on the market goes down. It means that supply chain model has to be designed in a way that replenishment of stock is executed on the base of forecasts in consumption of products or components, taking in to consideration logistics structures and costs and risks of having excessive quantities of inventories in the stores of the distributors. Basically, it is a task of optimization of the supply chain, which assumes integration of the supply processes and having distributors stock as a visible and sometimes controllable part of our replenishment system. We have lots of possibilities of automatic replenishment on the base of keeping optimal levels of stock, mainly via to data exchange between information Systems (ERP-systems) of company and distributors, for example through Electronic Data Interchange (EDI) interfaces. It is up to company's to choose the accepted level of risks and therefore quantities of ordering and moments of delivery can be changed due to company's supply strategy and market changes. This is why traditional business models of procurement, which can not provide optimal supply chain decisions, are often not very efficient today and companies have to replace them in order to meet customer expectations.

Wal Mart is a prime example of collaborative planning, forecasting, and replenishment (CPFR). They are step ahead of there competitors and that the reason there competitors are finding it hard to beat them on quality and on price. It is a matter of choice and it is not the chance we take; it's the choice we make, that determines our destiny.

Robin C. Trehan is an industry consultant in the field of mergers and acquisitions. He can be reached at robin@tafunds.com.

Jerry Cedicci is a renowned real estate developer in Chicago. He is associated with Beaux Arts Creations. www.bac.cc


Logos, product and company names mentioned are the property of their respective owners.

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