The dawn of the new century exhibited many changes in the business markets of MPC. The new century saw the shifting of production units of many large corporations like Ford, IBM, Black and Decker, IBM to other low-cost destinations in the developing nations. These low-cost destinations offered cost advantages as the firms could get access to labor at very low costs. In addition opening up of production units also gave the company a foothold into a new market. MPC is one of the largest and reliable suppliers faced the challenge as the clients encouraged MPC to open up its production units in the country.
The client suggested that as MPC as amongst its preferred suppliers hence the company needed to open up its production unit. MPC conducted forecasting studies and found out that there were great opportunities but the forecasts did not guarantee any fact or figure. The clients of MPC also stated that they would establish formal partnerships with MPC after it has set up its production unit in the client’ s locality. They would also give the company the tag of a sole supplier to some of their components.
The above baits to lure the company shows much growth for MPC in the near future but it also represented certain challenges. The forecasts predicted rosy scenarios for the firm but did not give a guarantee regarding the authenticity of the forecasted figures. Hence MPC faced a risky scenario with regards to opening up its business units in the client’ s location. The company in this scenario can face an effect which is popularly referred to as the bullwhip effect.
This effect occurs in supply chains which rely on forecasts for production. The bullwhip effect is referred to as the effect that occurs when the amount of the orders are amplified when there is an upstream movement towards the production side of the supply chain. (Beer Game, n.d. ).MPC should effective steps to manage its inventory so that the surplus does not contribute towards the bullwhip effect.
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