Managing Influence of Inventory Bullwhip Effect on Profit Maximization in Rural Retailing Using Monte Carlo Simulation
1. INTRODUCTIONIn the rural areas since the demand is not matured; the supply chain becomes susceptible to over inventorization in a frenzy to fulfil the demand. The consumption analysis of a rural inhabitant shows stark difference from that of an urban inhabitant. It is characterised by:1.1. Unmatured demandOver recent past the rural folks have undergone a great change. These changes are brought about by high government subsidies, higher level of income, telecom revolution and increase in the literacy level. The material requirement mix of a rural folk is different now. The demand for different goods in rural areas can be classified as household and non household. The former includes food grains and other eatables, clothes, essential articles needed for an ordinary living. Since the entire requirement is met through multiple channels (on the basis of make and buy) it remains difficult to plan the sourcing need with reasonable accuracy. The situation on the non household front is more unpredictable. He also needs mobile, fluorescent tubes, fridge, a book shelf, a storage steel almirah and other furniture. Such needs are related with occupational, religious, cultural, community and incidental engagements. The sporadic nature of material needs makes the entire game of demand and supply a puzzle. In rural environment these demands are not fully firmed up, hence the unpredictability in demand exists.1.2. Passive buyingA rural buyer is a passive buyer unlike an active and rather proactive buyer in urban areas. An urban buyer is a well informed buyer who applies more of his active judgement in the purchase decisions. A rural buyer is largely found to be in absence of any agenda for buying an article of particular make or brand. As such he remains to be coaxed and cajoled to buy an article from the retailer. The retailer has to spend a lot of time and money on person to person campaigning, counselling and brain storming. He has to respond to the first opportunity of consent for buying anything under such category. The success of a selling process depends totally on the intensity of need which is coupled with whims and fancies of the rural buyer. The rural retailer has to keep a store of a host of items in a given category; which only increases his inventory level.1.3. Less absorption of unused inventoryIn the rural retailing, the inventory which could not be sold is likely to remain idle owing to absence of the distribution channels for reverse supply chain. An item discarded by a potential buyer hardly finds a real buyer in the rural environment which is rife with words of mouth. Moreover, the absence of institutional demand on organized line provides chances of inventory clutter in rural supply chain. A rural retailer who runs a small scale enterprise is susceptible to Bullwhip Effect (BWE) into the item inventory. This erodes profit in the form of influence of inventory costs. He faces a decision issue while choosing one item over other so that his overall profit is sustained at the end of the selling season.2. BULLWHIP EFFECT (BWE) IN INVENTORYThe bullwhip effect mainly arises out of unpredictable demand. It is manifested in the form of unutilized material on supply side as a result of non absorption from the demand side. The more we go upstream the more non absorption of inventory is manifested. One can say bullwhip effect is the by product of main stream supply chain. Many studies have been done to identify the source of such effect in practical scenario and many trial solutions have been suggested. In supply chain, sometimes,however the by product action takes place in reverse direction. In other words, as we go down the supply chain direction we find more and more unabsorbed inventory rather than as we go upstream.Farmers producers act as stakeholders in supply chain on upside. They are engaged in planning, production,upkeep, maintenance of resources and monitoring of input output ratio.