1

1. Briefly describe the different ways to reduce demand uncertainty and their impact on supply chain performance.
Forecasting can be used to reduce demand uncertainty by helping to increase profitability and decreasing excess overstock inventory and prevent lost profits resulting from under stock. Another way to reduce demand uncertainty is to use quick response which reduces replenishment lead times and allow multiple orders for seasonable items. Improved forecast accuracy helps decrease lead times. This will help increase profits within the supply chain. The use of tailored sources to handle the uncertainty on behalf of the firm will also reduce demand uncertainty
2. Discuss how the product cost and margin determine the level of product availability.
The level of product availability is also referred to as the customer service level. A supply chain can use a high level of product availability to improve its responsiveness and attract customers. Production costs are expenses, such as materials and labor that a company incurs while producing a product to sell to consumers. The lower the production cost, the higher the profit, or the amount left over after you subtract your expenses from your sales revenue. However, low production costs does not always guarantee high profits. Margin is the difference between a product’s sales price and the cost of acquiring and maintaining the product prior to sale. Without adequate gross profit margin, businesses cannot pay their expenses and retain earnings for future growth. A high profit margin indicates that a company is operating efficiently and a low profit margin indicates a highly competitive market or an ineffectively ran business. If the availability of raw materials for manufacturing a specific product cannot be determined, or the cost is too high and will affect the bottom line then there is uncertainty in committing resources to begin production.