I emphasize the importance, coordination in, you know, creating value, but let's educate what happens if coordination fails. What is the, what is the cost we have to pay. As an individual company or, as the supply chain as whole. What is the, what is the cost? What is the, what is the, you know, consequences, when coordination fails? There is a, very famous example, the, very famous, well known concept, which is. Bullwhip Effect, which usually, is believed to be, one of the most serious consequences when coordination fails. And think about this situation. As usual, we have this you know, supply chain. Functions, supply chain systems, suppliers, manufacturers, distributors, and customers. And now, let's say that, you know, consider the a product, whose demand is usually very stable, in other words that it, it, it, it does not involve too much, you know, peak and downs, and so on and so forth. So usually, the end market demand is pretty much stable. And now, for some reason, let's say this is do some random, random cause or random, you know, phenomena. Whatever the reason, there is short period of time or maybe, one discreet event. When, the demand actually increases. You know, maybe shopping increases, due to some random event. Or random, you know, phenomenon, which is kind of normal. Which is kind of abnormal, right? Considering this you know, stable. Usually stable demand patterns. So, when we look at this customers demand patterns, we do as much fluctuation. We know that there is one, you know, small pick. Which is not that significant, not that serious. But, never the less, which is not you know, normal considering this whole, you know, regularly stable patterns of the demand not, in the market. Now, what does, the distributors see? I mean that, what is the, what's the kind of impression, this distribution function has. When it observers, this kind of a shot, there is more fluctuation. The distribution function fluctuates, accordingly, but it seems like the distributors, tries to, not tries to, but some how, magnifies this fluctuations. In other words it's you know, the magnitude of fluctuation is, larger and also it seems like it takes longer, to return to distributivity. In other words, as we move backward. As you move towards, optimal hours of supply chain. There's a small disturbance, there's a small irregularity, magnifies for them. And if we go one step further, backward, if we move one step, backwards. Then, we see the fluctuation becomes even larger. So the manufacturing function, when it observes what happens in the distribution function, it prepares itself or it sort of response to, its own observation what, what happens in, in the distribution. What about this you know, supply function, when we, go back a little further? It seems like the suppliers, also, you know fears something known manufacturing and the suppliers themselves, have to work. Something, in order to cope with that, fluctuation, in their own customers, in this case the manufacturers. So, as we move backward, the fluctuation becomes even larger and you know it takes even longer, to return to the distributor at the end. All these variations right, all these variations. Will vary, variations and the variability, and this implies that the as we. As we move, backward, along our supply chain, it seems like our uncertainty magnifies significantly. So uncertainty increases significant. In order to, you know, explain this phenomenon, in a more systematic way, I want to introduce a new concept, the concept, about information quality. In other words when we have information. How much, how much alive that information is. How much accurate that information is. How much precise, how precise that information is. Right? So information quality is you know, information quality implies, the accuracy precision. And reliability, of that information. And now, in the previous slide, we when we talked about bullwhip effect, it seems like as we move backwards, our information, quality seems to decrease, right? Information quality becomes. Worse and worse as we move, toward the option functions in our supply chain. In other words, the accuracy, precision, reliability, continuously decrease, as we move backward. As the information quality goes down, the uncertainty goes up. Right. So, I will just just say that there is, that relationship, information quality goes up, that implies that uncertainty goes up. Information quality goes down, uncertainty, goes up. So, why that happens? What actually determines, this information quality? I would just say that there are, basically, two factors that affect the information quality. In other words, information quality, is a function of two factors. The first one is, distance, right? Okay? The first one is distance. [SOUND] Distance between information source, and decision point. What is the information source? Information source is, the place where that information originate. In this case, we are, concerned, with this market demand, information. So them, the, the information about the market demand and they offer the information so, so [UNKNOWN]. You know, demand, information is, to market to customers. What is the decision point? Decision point is, where you have to make a decision, based on the given information, based on the information given to you. So let's say that if we, you know, look at this supply function. That is the decision point. And then information source is with the customers. Therefore if we decide, if we evaluate this information quality, at S, at the supply function, we have to look at the distance between, information source and decision point. So as you can imagine, the longer the distance, the lower the information quality. In other words as the distance between information soars a distance point, becomes longer. The information quality will go down further. So there is sort of inverse relationship. As the distance increases, the information quality goes down. I want to make sure that here, the distance is not just physical distance. It can be physical distance, it can be psychological distance, and also, can be emotional distance. For instance, if the information source and distance point there are some, you know, people involved there. And these, the peop, the person in the information source, and the person in the distance point. They ha, they don't have good relationship. In other words they, you know, fight each other and they disagree with each other. At a personal level, they dislike each other, and then, I would just say that even if these two person, these two people are in the same office, their psychological distance, or their emotional distance is quite far away, right? So, when I say distance, it is not about physical distance. The distance is about, not only physical distance, but also psychological and emotional distance as well. And the second factor that determined the information quality, is number of gatekeepers. Number of gatekeepers. Between, the information source and this general point. As the gate, as the number of gatekeepers increases the information quality will go down. That's, kind of very obvious, right? Whenever there are, many intermediary, intermediaries in between two points. The information is easily distorted and information can be quite incomplete. So let's put together all those things together. Let's see what, what's happening here. This is the bully effect, right? This is the bullwhip effect. As we move backwards, the fluctuation magnitude of fluctuation, increases, intensifies. And the time to stability, in other words, the time. You know, in order to ditch the stable situation, in order to reach stability, it takes longer. So, here, the end market the fluctuation is not that big, and the time to stability is very short. But as we move upward, upstream it becomes more and more damaging, more and more serious. So, as we move, from this customer market, to the source, the supply. The magnitude of fluctuation increases. And also time to stability increases. And that means that uncertainty increases. And we already know that, other things are being equal under, under regular context. As uncertainty increases, your inventory will go up as well. So, your inventory goes up. And then, we know that, there are some consequences of having too much inventory. What are they? First, your inventory management costs will, shut up significantly, and your innovation speed goes down significantly. And also your, learning capability our problem solving capability goes down significantly, and therefore we can see that, these are the consequences we can see, when the coordination fails. In this case specifically information sharing, is the coordination. But we can, we can, you know, extend, we can, extend this case to either coordination as well, like a new product development and a joint distro making in all of the activities. If we fail, coordination. If we fail, to coordinate for these activities and these you know subject, and these activities. Then, eventually, we have to pay, larger cost, and this cost, must be borne by, not only individual forms in this supply chain, but also, the supply chain as a whole. The supply chain as a whole must pay prices. Due to, the coordination value. And that's one of the example, one of the, you know, clear, examples, why, we have to make sure there is a high level of coordination, throughout the supply chain, in order to, enhance efficiency to bring value and also responsiveness to bring value. At the same time. [BLANK_AUDIO]
