Describe Profit Maximization.
Answer to Question: JNB330 Supply Chain Management
Closed loop supplier chain involves the recovery of products by customers in exchange for value. The product is then recycled to increase profit.
Closed loop Supply Chain is concerned with issues such as pricing and profit maximization. These are discussed in the report.Pricing
The pricing problems in closed loop supply chain are due to one retailer and a dominant producer.
Closed supply chains are notorious for their inconsistencies in terms of the cost of remanufacturing as well as the cost of collection.
Closed-loop supply chains can lead to high logistics and transportation costs.
Costs are involved when a product is shipped from the manufacturer to the end-user.
Returning the product from the manufacturer is another cost.
This means that the price is much higher.
It is important to consider the cost of information sharing in the supply-chain (Christopher 2016).
Peppard (2016) has shown that the increased dependence on technology for information sharing has resulted in an increase of costs.
This causes organizational and managerial challenges.
Closed-loop supply chains often have asymmetric and symmetric information.
Suppliers are always privy to information about their likelihood of experiencing any kind of disruption.
Logistics has always been about inventory management (Mangan, Chandra 2016).
The lack of forecasting makes inventory management difficult in close-loop supply chains.
Inventory management is most problematic at the retail store level.
Closed loop supply chain pricing is also affected by inventory policies.
Another factor responsible for pricing activities and different types of pricing is the recession.
The closed loop supply chain is also plagued by the problem of pricing older products.
The biggest factor in pricing is the enormous amount of money spent on inventory for both manufacturing and retail.
The product value will drop if there is excessive inventory.
Pricing decision is also dependent on product selection in supply chain.
Incorrect product selection could result in the product being returned or not being purchased by the customer.
This phenomenon lowers the product value.
Financial problems can be caused by inaccurate inventory counts or damaged inventory.
The most common problem for companies is the high cost of location inventory. This is due to poor planning.
Many logistics companies have problems with warehouse capacity.
If there are many products in the warehouse, it becomes a problem. This decreases the company’s revenues.
The problem is that channel members don’t have the motivation to follow the principals, even when the market can be very difficult (Kashyap Murtha 2017,).
Problems with channel members can arise when there isn’t enough support staff to distribute the product.
Another problem could be when one member has an effect on another member’s behavior.
It is possible for one person to have more power than the other.
This can impact the marketing channel.
There are instances of horizontal and/or vertical conflicts among members of the channel (Usui Kotabe & Murray 2017, 2017).
Bullwhip effect can occur in supply chain distribution networks when there is deviation from the manufacturer to the end-users (Xu et.al. 2016).
Transportation costs are higher the further the distribution network is.
It also results in longer delivery times for both forward and reverse supply chain systems.
The distribution network can have a lot more variability if it is extremely long, as it includes many organizations, facilities, and activities.
The optimization of vehicle routing has become an integral component of the closed loop supply chain, which affects productivity improvement in organizations (Wang und al. 2016).
The problem with vehicle routing is due to an identical set of vehicles, a central node for the depot, customer nodes, as well as a network that connects the customer and the depot.
Product returns in closed loop supply chains may cause problems (Ferguson and Souza, 2016).
If the supply chain management team does not adhere to the appropriate return policies, there can be problems when product returns are made by customers. (Pagell, Wu 2017).
The lack of appropriate policies for gatekeeping, disposal and avoidance can cause problems with return policies.
Customers are forced to return products if there are any defects in the product or they receive a different product (Sekaran, Roger 2016).
This is where the problem with return arises.
Closed supply chains have been dependent on return avoidance.
Products return more when SKU are not used properly (Kembro Veronica Granit 2017).
Gate keeping is about screening return requests as well as return merchandise. (Landin and Helena 2015.
If policies are not adhered to in an organisation, this can lead to problems with gatekeeping.
When the physical screening of merchandise is not done properly at the customer’s locations, there can be problems.
It can result in unwarranted merchandise being introduced to the distribution channel.
It is important to properly determine how the goods should be disposed.
It can only be done once the goods are received.
It is a problem if this policy is not followed (Braglia Castellano & Frosolini, 2016).
Another source of problems is when the supply chain strategy and different functional areas do not align with performance expectations and return management metrics.
Strategic alliances have certain risks that could impact the profits of the alliances (Kleymann, Seristo 2017).
These may include relationship and performance risk.
No one is willing to accept shared rewards and risk in the supply chains, which can lead to problems with strategic alliances (Pearlson & Carol 2016).
It can be challenging to establish relationships that reward and share risks.
Decentralized decision making in closed loop supply chains is problematic as companies that are involved with the logistics system may not be empowered or integrated.
There is no support from all the supply chains functions. The companies involved in the supply chains are not responsible for their supervision.
Many companies haven’t focused on integrating their supply chains.
The supply chain organization is not viewed as a single resource by many companies.
This is why there are often complications in the operation of the supply chain activities.
The inefficient leadership poses challenges to companies’ decision making.
Uncertainty and volatility in the supply chain can also impact profit maximization in closed loop supply chains.
Beyond the volatility in demand, the supply chain is also affected by increased commoditization.
The report has identified the problems with profit maximization within closed loop supply chains.
Many companies working in the supply-chain industry face problems with profit maximization and pricing. These factors have negatively impacted their profits during recession.
The report examines the problem in detail and provides solutions that companies can use to overcome them to gain market competitiveness and customer satisfaction.
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