MBAF 504 Term Paper: Economics and Supply Chain Management Analysis

This term paper provides a critical analysis of a journal paper focusing on supply chain management challenges, particularly those related to uncertain product demand forecasting. The paper connects these challenges to the core theories of supply and demand, examining how inaccurate demand predictions can disrupt supply chains. The author explores the shift from "make-to-stock" to "make-to-order" principles and the impact of factors like price changes, customer purchasing habits, and government policies on demand. The paper also relates the chosen journal paper to other works in the field, outlining economic models for mitigating demand uncertainty, such as contract-based models and pricing strategies. The paper concludes by emphasizing the relevance of demand and supply theories in addressing supply chain issues and offers solutions by linking economic models and providing relevant interpretations.

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

1ECONOMICS FROM A BUSINESS PERSPECTIVE
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

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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

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control over prices and the assumption for the costs of mismatch between the demand and
supply due to uncertainty.
The second model describes the problems related to joint ordering, pricing and the
difficulties due to the capacity planning process. Two kinds of pricing has been used in this
case, that is, dynamic pricing and static pricing (Souza, 2014). In static pricing the prices is
kept low by the farmer at initial stages while in later stages the prices are set high to take
advantage of the high demand. In variable pricing, the prices are set high at the beginning to
match the production with the demand. This was the uncertainties in demand can be
mitigated.
The third model is completely based on the coordination between the buyer and the
supplier (Sarkar, 2016). In this model there could be possibility of improvement of the
supplier by both players.
Comments on how the paper relates to the theories of economics
The important theories that are related to the paper discussed in the essay are theories
of demand and supply (Becker, 2017). This theory determines a very important factor that is
pricing. In a normal condition the theory states that the unit price of a particular good would
vary. The price of the good would only settle down at the point when the demand will
equalise the supply condition. This condition is referred to as economic equilibrium of the
transaction of price and quantity. Another theory that is important in the context of the paper
of the essay is the pricing theory which relate to the adjustments of strategies of price
according to the market conditions or according to demand and supply conditions (Aust &
Buscher, 2014).
Conclusion

4ECONOMICS FROM A BUSINESS PERSPECTIVE
From the above essay an inference can be drawn that the theories of demand and
supply could be related for solving the challenges faced in the supply chain management.
Through the paper highlighted in the essay, the reasons for the challenges are derived.
Another similar paper had been linked to this major paper in order to find out some of the
solutions to the problems through economic models. Finally, all the challenges as well as
models are linked to the theories of economics and relevant solutions are broadly discussed
and interpreted.

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References
Abou Maroun, E., Zowghi, D., & Agarwal, R. (2019). Challenges in forecasting uncertain
product demand in supply chain: A systematic literature review. 32nd annual
Australian and New Zealand Academy of Management.
Aust, G., & Buscher, U. (2014). Cooperative advertising models in supply chain
management: A review. European Journal of Operational Research, 234(1), 1-14.
Becker, G. S. (2017). Economic theory. Routledge.
Li, T., & Zhang, H. (2015). Information sharing in a supply chain with a make-to-stock
manufacturer. Omega, 50, 115-125.
Milne, A., & Parboteeah, P. (2016). The business models and economics of peer-to-peer
lending.
Roh, J., Hong, P., & Min, H. (2014). Implementation of a responsive supply chain strategy in
global complexity: The case of manufacturing firms. International Journal of
Production Economics, 147, 198-210.
Sarkar, B. (2016). Supply chain coordination with variable backorder, inspections, and
discount policy for fixed lifetime products. Mathematical Problems in
Engineering, 2016.
Souza, G. C. (2014). Supply chain analytics. Business Horizons, 57(5), 595-605.
Wang, G., Gunasekaran, A., Ngai, E. W., & Papadopoulos, T. (2016). Big data analytics in
logistics and supply chain management: Certain investigations for research and
applications. International Journal of Production Economics, 176, 98-110.