Profitability tailored sourcing

A more sophisticated approach to postponement separates all demand into base load and variation. The base load is manufactured using the low-cost method without postponement, and only the variation is made using postponement. This more sophisticated form of tailored sourcing is more complex to implement but can be valuable even when all products being postponed have similar demand, as we illustrate next (see spreadsheet Table 13-4). Consider the scenario in which Benetton is seUing four colors, and the forecast demand for each color is normally distributed, with a mean of fi = 1,(XX) and a standard deviation of o- = 5(X). We have observed earlier that the use of complete postponement (every sweater is postponed) in this instance increases profits at Benetton from 94,576 to 98,092. 

In volume-based tailored sourcing, the predictable part of a product s demand is produced at an efficient facility, whereas the uncertain portion is produced at a flexible facility. Benetton provides an example of volume-based tailored sourcing. Benetton required retailers to commit to about 65 percent of their orders about seven months before the start of the sales season. Benetton subcontracted production of this portion without uncertainty to low-cost sources that had long lead times of several months. For the other 35 percent, Benetton allowed retailers to commit orders much closer to or even after the start of the selling season. All uncertainty was concentrated in this portion of the order. Benetton produced this portion of the order in a plant it owned that was very flexible. Production at the Benetton plant was more expensive than production by the subcontractor. However, the plant could produce with a lead time of weeks, whereas subcontractors had a lead time of several months. A combination of the two sources allowed Benetton to reduce its inventories while incurring a high cost of production for only a fraction of its d and. This allowed it to increase profits. 

When can tailored sourcing be used to improve supply chain profits What are some challenges with implementing tailored souring ... 

The use of new meat-derived ingredients is a way of producing healthy, tailor-made foods without the use of non-meat additives. Not all meat sources can be profitably utilised, nor are they all aesthetically satisfactory. Furthermore, meat proteins cannot replace every non-meat ingredient, even in meat products. There are, however, many underutilised meat materials, and a large number of techniques waiting to be employed to develop cheap, highly functional meat ingredients. 

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