Supply Chain Management Assignment
ON

BULLWHIP EFFECT AND DELAYED DIFFERENTIATION

Submitted to

Prof Dr. P.R.S.Sarma

Submitted by

VENKATA RAJA GOPAL RACHERLA Regd. No.: 1226109236 SEC-B MBA (IB) - 2009-11

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INDEX

S No. I 1 2 3

Topic Bullwhip effect Introduction Explanation Causes of Bullwhip Effect Possible Remedies The Bullwhip effect in the electricity sector Conclusion Postponement or Delayed Differentiation

Page no. 3 4 4 5

4 5

6 7

6 II 1

10 11 12

Introduction

2

Forecasting uncertainty

14

3

The long-term potential

16

2

THE BULLWHIP EFFECT

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1. Introduction The bullwhip effect is the magnification of demand fluctuations, not the magnification of demand. The bullwhip effect is evident in a supply chain when demand increases and decreases. The effect is that these increases and decreases are exaggerated up the supply chain. The essence of the bullwhip effect is that orders to suppliers tend to have larger variance than sales to the buyer. The more chains in the supply chain the more complex this issue becomes. This distortion of demand is amplified the farther demand is passed up the supply chain. Proctor & Gamble coined the term “bullwhip effect” by studying the demand fluctuations for Pampers (disposable diapers). This is a classic example of a product with very little consumer demand fluctuation. P&G observed that distributor orders to the factory varied far more than the preceding retail demand. P & G orders to their material suppliers fluctuated even more. Babies use diapers at a very predictable rate, and retail sales resemble this fact. Information is readily available concerning the number of babies in all stages of diaper wearing. Even so P&G observed that this product with uniform demand created a wave of changes up the supply chain due to very minor changes in demand. 2.