The supply chain has several stages and the occurrence of such situations as lack of effective communication, mismanagement of time, disorganization, among others, can lead to mismanagement of processes and, as a result, generate a series of problems. . Among them is the boost effect, which occurs when there is a discrepancy between actual customer demands and what was expected.
This happens because businesses need accurate and correct information about consumer needs, in order to keep inventory prepared and produce properly, generating the ability to serve the public. However, when this data is skewed, several complications will befall the supply, such as poorly stocked product levels, increased costs, implications for the relationship with the public and partners, etc.
With that in mind, we have designed this content to show the main consequences of the boost effect and what measures can be taken to avoid it. To follow!
What are the main causes of the boost effect?
Among the main causes of the boost effect we can note:
- lack of communication: usually occurs between links in the supply chain, making it difficult to complete processes. For example, identifying a demand for a product in different ways within the different links of the operation and, therefore, different volumes are ordered;
- Price variations: Special discounts and other cost changes can impact regular shopping habits. Customers want to take advantage of short-term discounts, which can lead to erratic production and skewed data in relation to demand;
- disorganization: the lack of organization in the links of the supply chain can lead to larger or smaller orders than necessary;
- Free return policies: in this case, customers may intentionally overstate orders in times of shortage and then cancel, causing inconvenience and loss;
- Batch orders: A mistake is to accumulate demand to place the order immediately to suppliers. Ordering weekly or monthly is ideal as this practice creates demand viability, as at certain times demand may be higher and then much lower than expected.
What are the consequences of the boost effect on logistics?
The boost effect can have several consequences, not only for the logistics industry, but for the business in general. Discover the main ones!
Increased inventory costs
With the appearance of variations in the quantity of orders, managers must keep the operation available by stocking a greater quantity of items, with an emphasis on the ability to fulfill any orders that may appear in a given period. .
However, it is possible that demand may be weaker than expected, leading to lower sales and production of goods. Thus, the stock is stopped, which will increase the operating costs, in addition to increasing the risks of perishability, deterioration, expiration of the expiration date of the products, etc.
Another problem caused by the boost effect is the urgency to fill short-term orders. When this happens, there can be stress in the relationship between the company and the supplier, generating misunderstandings and quality issues in the relationship, which can lead to the breakdown of the partnership over time.
Ineffective order dispatch schedule
The instability generated by the boost effect also hinders the creation of a schedule for sending orders to suppliers, making it more difficult to predict how much and what volume of purchases will be made. Likewise, it impacts the supplier, who will have problems with fluctuations in demand and may not be able to fulfill orders even when they are higher than expected.
Variations in the availability of items
Variations also affect the availability of goods for sale. So when this happens, there is a good chance that you are overstocking certain products or running out of them. The organization may face not only operational loss but also dissatisfaction and eventual loss of customers, who will turn to the competition to have their needs met.
What are the solutions to minimize the boost in logistics?
Some measures are effective enough to minimize the boost effect. Next, we’ll show you some of them.
Align internal strategies
Several actions can generate the boost in logistics, for example the practices to achieve objectives in the sales sector, considering that they directly influence the volume of orders. Thus, it is more suitable for managers to communicate clearly and have ideas aligned. When performing periodic analyzes, it is necessary to carefully check the data of the measurements that were used so as not to pick up distorted and erroneous figures.
Improve operational performance
Internal processes can be optimized with tools that allow better control of inventory levels and help better forecast customer demand. Another tip is to have carriers that work with split loads, as this way the company does not need to place very large orders to get a better price compared to the cost of transportation.
Listen to everyone involved in the supply chain
The boost effect can also be reduced through better information sharing. All parties involved in the supply chain should be aware of the needs of the end consumer, and organizations should be aware of their suppliers’ outstanding inventory and thus avoid incorrect orders or delays.
Optimizing Processes Using Technology
One tip is to rely on software and other automation tools to streamline and optimize processes, for example, inventory projection and management, demand forecasting, raw material planning, among others. essential activities for best results.
Assess stock often
Another challenge is to periodically reassess the minimum and maximum stock volume, in addition to making the necessary adjustments. In this case, the company can consider regular reports and other resources, as an effective system, to help in the correct assessment of these factors.
Now that you understand what the boost effect is and its consequences, in addition to putting into practice the tips presented for optimizing organizational processes, it is important to employ other good practices, such as mapping process, team preparation and monitoring of indicators and, in this way, to be able to detect problems and solve them on time, thus avoiding losses for the company.
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