The Whip Effect That Affects Corporate Profits

Are they selling clothes or making clothes? Many people have bought cloth and made clothes. Comparing the cost with the price in the store, it is found that they are totally different.

So it is taken for granted that making clothes must be very profitable.

But this is not the case. Many garment factories have been opened up all over the country, but there are few profits in the end.

People are puzzled, raw materials are so cheap, and the selling price is so high. How can they not make money? The reason is simple.

What is the whip effect? The whip has a very long rope. If suddenly shaking, the whip will show a waveform, which is more and more magnified. This is called the whip effect, which is the step by step amplification effect.

Although the cost of a garment is very low, because of the whip effect, the cost of inventory has been enlarged step by step, and the garment factory will become a huge number and devour the profits of the factory.

In a direct shop, a customer needs 1 X style large size clothes, because there are few people who buy this style, and there is no stock in the shop, so they have to order from the dealer.

The boss is very smart, since there are 1 needs, if I order more than 1, sales should be no problem, so decided to book 2 large X style clothes for dealers.

After the information was sent to the local distributor, the dealer thought that a store would have 2 such clothes. I had 15 outlets in the city, which could be sold, that is, the demand for 30 pieces, so I would be conservative. Ordering 8 pieces should not be a problem.

So, the local distributor decided to send information to the provincial distributor. I want 8 X style large size clothes.

After receiving the information from the provincial dealers, we also follow this train of thought. There are 8 agents, and I have 25 agents in the whole province, that is, the demand for 200 pieces. There is no question that the market should be digested 64.

So I report to the manufacturer. I want 64 X large size clothes.

When this information is sent to manufacturers, manufacturers are excited. This provincial distributor wants 64 X styles and large size clothes. I have 30 provincial distributors in the whole country, that is, the quantity required for 1920 items, and 500 pieces produced by Sir.

So overtime production, but the actual situation? Only 1 pieces of customer demand.

After the first tier and first tier, the company has become 500.

How do we get out of it? Most of them are in the warehouse of garment factories.

Heightened the overall cost of an enterprise.

Where does the problem arise? From the first level, every level thinks that a subordinate needs so many pieces. How many subordinates do I have? How many of them will be needed in general? How much should I have in general? How much should I make a discount? How many pieces should be OK and make a subjective judgement? In this way, the delivery of information is just like the "whip", and gradually expands, and finally, it has completely divorced from reality.

The information of the subordinate enterprises can not be grasped clearly, and the grasp of the market is often based on subjective speculation.

The solution is to improve the management structure and establish a smooth information communication mechanism.

Precise management is put forward.