Since order batching contributes to the btJlwhip effect,
companies need to devise strategies that lead to smaller
batches or more frequent resupply. In addition, the
counterstrategies we described earlier are tiseful. When
an upstream company receives consumption data on a
fixed, petiodic schedule from its downstream customers, it will not be surprised by an unustially large
batched order when there is a demand surge.
One reason that order batches are large or order frequencies low is the relatively high cost of placing an
order and replenishing it. EDI can reduce the cost of
the paperwork in generating an order. Using EDI,
companies such as Nabisco perform paperless, computer-assisted ordering (CAO), and, consequently, ctistomers order more frequendy. McKesson's Economost
ordering system uses EDI to lower the transaction
costs from orders by drugstores and other retailers.''
P&G has introduced standardized ordering terms
across all business units to simplify the process and dramatically cut the number of invoices." And General
Elearic is electronically matching buyers and suppliers
throughout the company. It expects to purchase at least
$1 billion in materials through its internally developed
Trading Process Network. A paper purchase order that
typically cost $50 to process is now $5