Why is it important to ensure that incentives are aligned in

Why is it important to ensure that incentives are aligned in a supply chain? (Hint: see summary at end of the presentation for Chapter 4).

Solution

Incentives are allign to supply chain in following ways:

a) Since in supply chain the basic business drivers perform the whole proces that is Inventory, transportation , facilities and informaton etc.  

b) Inventory is mazor source of cost . organisation need to decide how much inventory they need to store at each level of supply chain . the manufacturer will be more responsive to the customer demand, on the other hand if manufacturer has large stockpile of inventory , the holding cost will increase.

c). Organsation use Transportation to move components and products between the different stage of supply chain.there is a trade off between responsiveness and efficiency. If firm uses AIR transport to transport , its responsivemness increases, but cost efficiency decreases because of high air transport cost. similarly, if firm uses land and water transport , its cost efficiency increases but its responsiveness decreases.

d). facilities are the location where the raw material and finished goods are stored .More facilities close to customer may improve the supply chain effectiveness but cost of maintainence of so many facilities will be high.

e). Information : The value of information as a supply chain driver is undermined due to its abstract quality.