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SUPPLYCHAIN

MANAGEMENT

Copyright Macmillan Publishers India Ltd.

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BULL WHIP EFFECT

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CASE STUDY

CUSTOMER ORDER TOEQUIPMENT DELIVERY:BEST PRACTICES AT XEROX

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Bullwhip Effect

Bullwhip effect refers to the tendency forfluctuation in demand to increase as they moveup the supply chain resulting excessive inventoryholding across network.

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Bullwhip Effect

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Bullwhip Effect

Procter & Gamble (P&G) first noticed thephenomenon in the US when the company

examined order patterns for its diaperbrand Pampers

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Factors contributingBullwhip Effect

The causes of the bullwhip effect that distortsinformation as it is transmitted up the chainare:

Demand forecast updatingOrder batching

Price fluctuationRationing and shortage gamingLead time

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Demand forecast

Demand Forecasting: Traditionally demandis forecasted at each level in the supply

chain based on the preceding levelsprojections.This lead to the aggravation of

Demand uncertainties at the highest level.

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Lead Time

More is the lead time more is thefluctuation.

As lead time increases, safety stocks areincreased, and order quantities are increased.More variability.

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Batch Ordering

The traditional practice of Batch orderingby the retailers also fuels the Bullwhip

effect. Batch ordering is generally done to availtransportation discounts, or reducingordering cost, or sometimes for incentives

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Price fluctuations

If prices to retailers fluctuate, then they may try to stock up when pricesare lower, again leading to variability.

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Alleviating Bullwhip effect

Centralizing Demand Forecasting Reducing Price Variability

Strategic Partnership Reducing Lead Time

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Centralizing DemandForecasting

It is to provide each stage of supply chainwith complete information about the

customer demand.

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StrategicPartnership

Strategic partnering (SP) is when two or more firms that have

complementary products or services join such that each may

realize a strategic benefit. Types of strategic partnering maybe :

Quick response

Vendor managed inventory (VMI)

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