To get around this, Whang says, information about demand at the site farthest downstream must be made available to the upstream sites. In other words, retailers must tell manufacturers exactly how various items are selling. This gives the manufacturers necessary data for making sound plans for the future. But I have to have my retailers' information. Instead of having each company myopically optimize its own inventory, companies need to look at the whole supply chain.
Companies make a practice of batching because it saves time and money.
It is cheaper, for example, to transport infrequent large orders than frequent small ones. Likewise, the administrative costs of generating one large order of a certain item are smaller than the cost of generating many small orders of the same item. But while sporadic ordering is cheaper, it leads to unsettling surges in demand on the manufacturing side. For instance, an electronics chain might know that the maker of a popular new laser printer currently has very limited capacity to produce the item. Meanwhile, the printer is selling rapidly and generating healthy profits for the chain, which wants to order 100 more.