Economics from a Business Perspective

Running head: ECONOMICS FROM A BUSINESS PERSPECTIVE
Economics from a Business Perspective
Name of the Student
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Author’s note

ECONOMICS FROM A BUSINESS PERSPECTIVE1
Introduction
The main objective of this essay is to bring about a critical analysis of a journal paper
that focusses broadly on a current event that has been occurring in the field of supply chain
management with relation to supply and demand. The paper stated in this essay primarily
describes the challenges that are faced in the process of supply chain management for
managing the uncertain product demand. The theories of supply and demand are linked with
the subject proposed in the paper, about the ways by which the challenges are related to the
principles governing the supply and demand of any product or service.
Summary and critique of the paper – Economic analysis
The journal paper chosen for this essay focusses on the challenges that are faced by
supply chain management on a regular basis due to the improper forecasting of product
demand. This has primarily happened due to uncertainties that arise due to conditions that
were not previously forecasted by the management (Abou Maroun, Zowghi & Agarwal,
2019). It has been seen that supply chains are based on four essential functions, that is,
selling and distribution, production and procurement (Abou Maroun, Zowghi & Agarwal,
2019). The management controlling the operational department uses various tools and
techniques in order to focus on the disruptions that occur in the department which prevent the
smooth flow of goods. This is ensured in order to meet the expectations of the customers to
the highest level.
It has been seen that the supply chains used to work based on the principle of “make-
to-stock” which means making surplus amount of the product without prior knowledge of the
demand (Li & Zhang, 2015). In recent days, this principle has changed and the supply chains
believe on the principle of “make-to-order”, where the products are made catering to the
demand of the customer (Roh, Hong & Min, 2014). The challenge occur due to the decision

ECONOMICS FROM A BUSINESS PERSPECTIVE2
taken by the organisations for keeping the units in stock for their next sales. This decision is
based on certain assumption following the current or historical track records, which leads to
inaccuracies and inefficiencies in the process. This problem is referred to as uncertain
demand forecast. This uncertainty comes from three possible reasons. These reasons could be
uncertainty of the demand forecast, during external process and in internal supply process.
The internal process constitutes of employees, management, communication within the
departments and culture of the organisation (Roh, Hong & Min, 2014). Another most
frequent challenge faced by the management is the forecast of the change in price which
might lead to inaccuracies. Another challenge attributes to the environment which is greatly
affected by the purchasing habit of the customers and the overall demand for the products.
The external challenges could be change in government policies and also the time of leading.
From the above discussion it is observed that the challenges can be mitigated by
bringing on theories of demand and supply and utilise them for the purpose of mitigating the
challenges that are faced in the department of supply chain.
Comments on how the article relates to other works on the same subject
The uncertainties that arise due to improper prediction of demand factors could be due
to many reasons as discussed in the main article paper chosen for this essay. In other papers
the models of economics could be used for mitigating the problem faced by the supply chain
management due to uncertainties in demand of the customers (Wang et al., 2016). One of
such papers provide description of three such models. The first model links to the problem
with two sets of contracts. These contracts could be related to factors such as acquisition cost
and level of risk imposed on the firm. This is mostly seen in agricultural production and to
mitigate the problem the farmer rents out the farm to a handler to avoid the uncertainty
(Milne & Parboteeah, 2016). In such a situation the farmer faces a trade-off between gaining