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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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