Thursday February 03, 2005 On The Margins
(Masood Mortazavi)
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Thursday February 03, 2005
[ Economics ]
Economical Manufacture vs. Economical Distribution
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In his 1963 book, My Years with GM, Alfred Sloan displays a canny, strange and nonchalant approach to passing over subtle theoretical concepts as he unfolds the concrete story of the company. In a chapter on development of financial controls, which I read on the plane from Frankfurt to San Francisco earlier this morning, he notes that from the standpoint of dealers' convenience (i.e. from the standpoint of distribution efficiencies, timliness-to-market and inventory reduction), "the factory should have varied its output to conform to seasonal demand" in order to reduce "the risk of obsolescence and the cost of storing finished products for both dealer and manufacturer."
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This fundamental tension basically implies that while continuous adjustment of production in response to fluctuation in retail demand would yield various distribution and inventory efficiencies, it will also cause inefficient plant utilization and an increase in the burdens upon the employees.
Economics, Distribution, Manufacture, Inventory
2005-02-03 18:09:31.0 --
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