JNB330 Supply Chain Management

Question:

Please describe Profit Maximization and Pricing.

Answer:

Introduction

Closed loop supply chain is about the collection of products from customers as a substitute for value. The product can then be recycled to increase profit.

Closed loop supply chain is concerned with the issues of profit maximization as well as pricing.

Pricing problems in closed loop supply chains are caused by one retailer and one dominant manufacturer.

Closed supply chain systems are subject to large variations in the remanufacturing costs and the collection cost of users products.

The problems with closed loop supply chains include high logistics and transportation costs.

There is a cost involved once the product reaches its end user.

It also costs some transport cost if the customer returns the product.

The cost of shipping the product back is significantly increased.

Costs in information sharing in supply chains are a significant issue (Christopher 2016.

Peppard and John (2016) have found that there has been an increase in dependence on information technology for information sharing.

This creates organizational and managerial obstacles.

In closed loop supply chains, the problem of symmetrical and asymmetric information is very common.

The suppliers have all the information they need to predict any disruptions.

The key factor in logistics is inventory management (Mangan & Chandra 2016).

Insufficient forecasting causes inventory management problems in the supply chain.

Most inventory management problems are at the retail shops.

Also, inventory policies have negative effects on pricing in the closed loop supply chain.

This management activity and pricing are also affected by the recession.

In closed-loop supply chains, pricing of older products can be a problem.

In terms of pricing, the most important factor is the large amount of money that has been invested in inventory by both manufacturing and retail companies.

If there is too much inventory, the money gets stuck up and the product’s value decreases.

The selection of the products in the supply chain is also important.

A poor product selection can lead to product rejection or return.

This causes a drop in the product’s value.

Companies involved in supply chain activities can face financial difficulties if inventory is damaged or inaccurately counted.

Lack of planning can lead to high inventory costs in locations.

Logistics companies face many problems because of the limited storage capacity in their warehouses.

The warehouse becomes a problem when there are too many products. This can reduce the revenue of the logistics companies.

Profit Maximization

Channel members don’t have the motivation to comply with the principals, even when the market is extremely difficult (Kashyap Murtha 2017).

When there isn’t enough people to support distribution, the problem with channel members can arise.

The behavior of one member can be affected by another member.

A situation in which one member has more authority than another can also be problematic.

This could impact the marketing channel.

There can be horizontal and vertical conflicts among channel members (Usui Kotabe and Murray 2017, respectively).

Bullwhip effect occurs when there are deviations between the manufacturer (Xu et.al.

The transportation costs will increase the longer the distribution network.

It also results in longer delivery times for both forward and reverse supply chain systems.

If the channel involves many facilities and organizations, it can cause a lot more variability in the distribution network.

The optimization of vehicle routing is an integral part of closed-loop supply chains, which can have a negative impact on productivity for organizations (Wang et. al.

The problem in the vehicle routing system is caused by a set of identical cars, a central depot node and customer nodes as well as a network connecting customers and depots.

Problems with product returns in closed loop supply chains can occur (Ferguson and Souza 2016.

If supply chain managers don’t adhere to the correct return policies, problems can occur when customers request product returns (Pagell & Wu 2017).

Inadequate gate keeping, disposition and avoidance policies can lead to many problems regarding return policies.

When a defect is found in a product or when a replacement product is delivered, a customer may be forced to return the product (Sekaran und Roger 2016).

In these cases, the problem of return is a real issue.

In closed supply chains, return avoidance is a key component.

The product’s return rate increases when SKUs aren’t properly used (Kembro and Granit 2017, respectively).

Gatekeeping includes screening both return request and return merchandise (Landin, Helena 2015).

When policies aren’t followed correctly in an organization, gate keeping can become a problem.

Problems can arise when merchandise is not properly screened at customer locations.

This can lead to unwarranted merchandise entering the distribution channels.

The goods must be properly disposed of.

Only after they are received is it done.

Problems can be caused by a lack of a determination policy (Braglia Castellano and Frosolini 2016, respectively).

Problems can also arise from a lack of alignment between the supply chain strategy, functional areas and performance expectations.

Strategic alliances have certain risks that could impact the profits of the alliances (Kleymann 2017 and Seristo 2017).

These could be relationship and performance risks.

Strategic alliances can cause problems because no one is prepared to take on the shared risks and reap the rewards of the supply chain (Pearlson. Carol. and Dennis 2016.

It isn’t always easy to create relationships based upon shared rewards and risk.

The problem with closed-loop supply chain decentralization is that the logistics companies are not fully empowered and integrated.

There is little support in all of the supply chain functions. These functions are not overseen by the companies involved in the supply chains.

Many companies don’t focus on integrating the supply chain.

Companies do not see the supply chain organization and capabilities as one resource.

This is why supply chain activities can be complicated.

The inefficient leadership causes companies to face difficulties in their decision making.

Volatility and uncertainty in the supply chains are two other problems that can impact profit maximization within the closed loop supply chain.

The supply chain is affected by the increased commoditization, which goes beyond the demand volatility.

Conclusion

The report identified the problems in pricing and profit maximization within the closed loop supply chain.

Supply chain companies are faced with many problems regarding pricing and profit maximization. This has impacted their profitability in recession.

The report provides detailed information that will help companies address these issues and improve customer satisfaction.

References

Braglia Marcello Davide Castellano and Marco Frosolini.

“A novel approach for safety stock management in a coordinated Supply Chain with controllable Lead Time using Present Value.”

Applied Stochastic Models in Business and Industry 32.

Calmon, Andre P., & Stephen C. Graves.

“Inventory management in an electronic consumer electronics closed-loop supply system.”

Manufacturing & Service Operations Management.

Logistics & Supply Chain Management.

Pearson UK, 2016.

Ferguson, Mark E., Gilvan C. Souza, editors.

Closed-loop supply networks: new developments to improve business sustainability.

CRC Press 2016.

“Big data and predictive analysis for supply chain performance and organizational performance.”

Journal of Business Research 70 (2017): 308-317.

Kashyap (vishal) and Brian R. Murtha.

“The Joint Effects Ex Ante and Post Governance on Compliance in Franchised Market Channels”

American Marketing Association, 2017.

Kembro, Joakim Han, Veronica Danielsson, Granit Smajli.

“Network Video Technology: An innovative approach to warehouse operations improvement”

International Journal of Physical Distribution & Logistics Management accepted (2017): 00-01.

Kleymann and Birgit Seristo.

Managing strategic alliances with airlines.

Landin, Linette, Helena Harrysson.

“A Total Cost Analysis Online and In Store of the Return Process”

Global logistics and supply-chain management.

John Wiley & Sons. 2016.

Pagell, Mark, Zhaohui Wu.

“Business implications from sustainability practices in supply chain management.”

Sustainable Supply Chains. pp.

Springer International Publishing. 2017.

Pearlson Keri E., Carol S. Saunders and Dennis F. Galletta.

A Strategic Approach to Managing Information Systems and Using It, Binder Ready Version.

John Wiley & Sons. 2016.

Peppard and Joe Ward.

The strategic management information systems: Building a strategy.

John Wiley & Sons. 2016.

Roger Bougie, Uma, Sekaran.

A skill-building approach to research methods for business.

John Wiley & Sons. 2016.

Usui, Tetsuya and Masaaki Kolake, as well as Janet Y. Murray.

“A Dynamic Process to Build Global Supply Chain Competence Through New Ventures: Uniqlo’s Case.”

Journal of International Marketing, 2017.

Xu and Jun Wang.

“Research on evolutionary mechanism for agile supply chain networks via complex network theories.”

Engineering Mathematics, 2016.

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