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