BULLWHIP EFFECT

TERRY CHIN

What is bullwhip effect?

• Occurs when companies significantly cut or add inventories.

• Small increase in demand can easily cause a big snap

Causes

• Customer demand is hard to predict, relatively unstable

• Demand forecast is always inaccurate, based on statistics!

Causes• Poorly maintained and unmanaged

Supply Chain

• Lack of communication

• Lack of coordination

Causes• Orders batching

• Shortage gaming

As a result!• When demand rises, participants will

increase their orders

• When demand falls, orders fall or stop

Countermeasures

• Providing access to point of sale (POS) data.

• Vendor Managed

Inventory (VMI)

Countermeasures

• Smaller but more frequent orders

• Make use of Electronic Data Interchange (EDI) and Computer Aided Ordering (CAO)

Countermeasures

• Reduce minimum batch sizes

• Allocate units based on past sales instead of current sales

THANK YOU

Bibliography http://www.quickmba.com/ops/bullwhip-effect/

http://sloanreview.mit.edu/improvisations/2010/01/27/understanding-the-bullwhip-effect-in-supply-chains/

http://www.youtube.com/watch?v=Te3YC1GeLaE

http://www.counterfeitchic.com/entryimages/wall_bull1.jpg

http://www.murphywhips.com/Whip_Collectors_-_Scobie_Stock_Whip.jpg

http://www.shjconsulting.co.uk/gifs/demandPlanning.jpg

http://2.bp.blogspot.com/_6BTY_R3aBUo/TI-p72fBEfI/AAAAAAAAACw/VbsRnuMXvBI/s1600/inventory.jpg

http://bionicbong.com/wp-content/uploads/2011/03/broken-supply-chain.jpg

http://cstpr.colorado.edu/prometheus/archives/UKMET%20Short%20Term%20Forecast.png

http://connect.mytmc.com/resource/resmgr/exec_blogs/bullwhipeffect1.gif

http://connect.mytmc.com/resource/resmgr/exec_blogs/bullwhipeffect1.jpg.gif

http://packaginghypermarket.co.uk/wp-content/uploads/image/vendor-managed-inventory.jpg

http://promotedprofits.com/wp-content/uploads/2010/11/affiliate-marketing-sales.jpg

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http://www.bigtopmania.co.uk/images/peteza_cowboy_bull-whips.jpg