...Supply Chain Coordination and Bullwhip Effect Name University Instructor Institution Date Supply chain coordination and bullwhip effect Introduction The development of effective coordination in organizations is essential for the maximization of the process of turning competitive advantage into profitability. Such coordination must occur both within the organization production and sales departments and beyond to include organizations contracted to handle its products. The process of coordination seeks to ensure that customer satisfaction is achieved through the adoption of approaches that are in tandem with their point of view. Organizations also adopt supply chain coordination to enable them align their plans with the objectives of individual enterprises that that handles their products. As such, the process emphasizes on the management of inventories and the ordering process within the organization and also within other organizations that do business with the company (Gupta & Mishra, 2012). Bullwhip effect is a trend that results into significant swings in the inventory responses in relations to alterations customer’s demands. The instability witnessed with the customer’s demand leads to the need for organizations make forecasts for demands in order to enable them position their inventory and other resources in line with the customer demand. As a product moves up the supply change, the participants within the chain observe variations in demand and this...
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...THE BULLWHIP-EFFECT IN A MULTI LEVEL SUPPLY CHAIN NETWORK Research in Progress Reisich, Friedrich, University of Duisburg-Essen, 2247800, Essen, Germany, friedrich.reisich@stud.uni-due.de Abstract Forrester discovered the amplification and oscillation of order information in supply chains about 55 years ago and called it the Bullwhip Effect. Since then researchers look for reasons and try to find countermeasures. Most of the countermeasures which were formulated in the last decades are based on experiments with simple linear supply chain models consisting of two to four serial levels. In reality supply chains are complex and dynamic systems. In this paper we developed a dynamic simulation model of a complex simulation network and statistically examine whether the countermeasures described in the scientific literature work or do not work. The preliminary results shows us that at least one countermeasure which works perfectly in linear supply chains is also suitable for complex supply chain networks. Keywords: Bullwhip Effect, Forrester Effect, Whiplash Effect, Supply Chain Networks.. IS Research Fundamentals 1 1 Introduction The Bullwhip Effect or Forrester Effect is a major problem in supply chains. It was first discovered by Forrester (1972) who realized that variations of demand increase up as one moves up the supply chain from the ultimate customer to the ultimate producer. This phenomenon is considered one of the main reasons for inefficiencies...
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...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 1 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 3 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...
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...Bullwhip Effect Analysis A significant phenomenon in supply chain management (SCM), first observed by Forrester (1961), shows that the orders variability along the upstream direction is amplified in supply chain networks. Subsequently this observation was termed as bullwhip effect by Lee, Padmanabhan, and Whang (1997a, 1997b). Such extreme distortion for the actual end customer demand to upstream have been proved to significantly increase costs and lower performance (Chen, L. and Lee, H. L. 2012; Wang, X. and Disney, S. M. 2016). In this regard, many research has been achieved to investigate the bullwhip effects from the perspective of supply chain and operation research. In construction industry, Taylor, J. and Bjornsson, H. (1999) firstly studied demand distortion of construction material and discovered that cumulative orders from contractors amplified along the upstream to the supply house due to the inability to share information. However, unfortunately, very limited research has been done to focus on the bullwhip effect in construction industry. Current study regarding the reduction of bullwhip effect can be briefly divided into three main aspects. One stream is to focus on information sharing mechanism to decrease bullwhip effect as well as increase supply chain stability (Ouyang, Y. 2007; Agrawal, S. et al., 2009; Dai, H. et al., 2016, Dominguez, R. et al., 2014). In fact, technologies, aimed at enhancing information sharing and communication mechanism, has been broadly...
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...Introductions of bullwhip effect According to Lee et al. (1997b) there is a phenomenon that the variance of orders may be larger than that of sales, and the distortion tends to increase as one moves upstream which is called bullwhip effect. It is a distortion in the sharing of information from downstream to upstream in the whole supply chain system; the effects can propagates the enterprise’s marketing, logistic and manufacture. Despite There are lots of factors 9 which could affect the efficiency of supply chain, like organization structure, channel of information, geographical distribution, industry characteristics etc., the bullwhip effect is still one of the most deep-rooted influence factor for the whole system. You cannot find another such kind of element like the bullwhip effect which could affect all parts of the whole supply chain system. No matter what kind of industry the firm are, what place does the firm in or how hard does the firm try by its own, the processes inside of the firm from producing plan to all kind of inventory must be all influenced by the bullwhip effect and hard to avoid. That is why the bullwhip effect is one of the most deep-rooted influence factor. QUESTION 1 (A) Discuss the term “bullwhip effect” and its causes. The bullwhip effect is a distribution channel phenomenon in which forecasts yield supply chain inefficiencies. It refers to increasing swings in inventory in response to shifts in customer demand as you move further up the supply chain. The...
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...in a supply chain for the supplier‘s performance Bachelor thesis: Organization studies, 2nd semester, academic year 2011-2012 Thesis Circle: Time will tell…. A processes perspective on inter-organizational collaboration Name: PC Jansen ANR: 770926 E-mail: P.C.Jansen@uvt.nl The importance of information sharing in a supply chain for the supplier‘s performance Abstract This literature review investigates the effect of information sharing from a buyer to a supplier in a supply chain on the performance of that supplier, with taking in mind that the supplier has to combat the bullwhip effect. With the existence of the bullwhip effect, a supplier cannot make right forecasts and therefore has difficulties in planning its production and/or inventory control. This research shows that information sharing is the key solution to reduce or avoid the bullwhip effect and, by that, it positively influences the performance of the supplier in the chain. Keywords: Bullwhip, supply chain, information sharing, supplier performance, inventory control, single-echelon, multi-echelon Thesis Circle: Time will tell…. A processes perspective on inter-organizational collaboration Supervisor: Remco Mannak Supervisor 2: Annemieke Stoppelenburg Name: PC Jansen ANR: 770926 E-mail: P.C.Jansen@uvt.nl 2 Table of contents Table of contents 3 1. Introduction 4 2. Theoretical Framework 7 2.1 Bullwhip effect 7 ...
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...Measuring the Bullwhip Effect Termpaper for International Logistics WS14/15 Lecturer: Christian Deckert Johannes Wolff BA13, International Business , International Trade 1132214046 Table of Contents List of Figures ii 1. Introduction 1 2. The Bullwhip Effect as a Supply Chain Phenomenon 1 2.1. Managing the Supply Chain 1 2.2. The Bullwhip Effect as Supply Chain Dynamics 2 2.3. The Bullwhip Effect as an Inevitable Consequence of Supply Relations—The Beer Game 3 2.4. The Reasons for the Bullwhip Effect 3 2.5. Studying the Bullwhip Effect in Data 5 3. Formal Analysis of the Bullwhip Effect 7 3.1. Models Based on Serially Correlated Demand 7 3.2. Measuring the Effect of Transparency 8 4. Mitigating the Bullwhip Effect 8 4.1. Information Policy 8 4.2. Reducing Lead Time 8 4.3. Collaboration of Retailers 9 5. Summary 9 References 10 Appendix 12 List of Figures Figure 1: Order fluctuations in the beer supply chain 12 1. Introduction The US-American telecommunications company CISCO depreciated 2.25 million US dollars in the third quarter of 2001 due to excess stock (Beer, 2014, p. 1). According to Beer (2014, p. 3.) the bullwhip effect is the probably most important reason for this depreciation. The bullwhip effect affects production and leads to a shortage of stocks or excess stocks, drops in sales, increases inventory costs and instability of planning (Beer, 2014, p. 3). Productivity losses due to the bullwhip effect are between...
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...BUULLWHIP EFFECT BACKGROUND The bullwhip effect occurs when the demand is amplified in the supply chain as they move up in the channels of the supply chain of a firm. Distorted information from one end of a supply chain to the other can lead to tremendous inefficiencies. Companies can effectively counteract the bullwhip effect by thoroughly understanding its underlying causes. Procter & Gamble (P&G) introduce this term. Logistics executives at Procter & Gamble (P&G) examined the order patterns for one of their best-selling products, Pampers. Its sales at retail stores were fluctuating, but the variabilities were certainly not excessive. However, as they examined the distributors' orders, the executives were surprised by the degree of variability. When they looked at P&G's orders of materials to their suppliers, they discovered that the swings were even greater. At first glance, the variability did not make sense. While the consumers, in this case, the babies, consumed diapers at a steady rate, the demand order variability in the supply chain were amplified as they moved up the supply chain. P&G called this phenomenon the "bullwhip" effect. (In some industries, it is known as the "whiplash" or the "whipsaw" effect.) Causes of the Bullwhip Effect Researchers found out that the factors which cause the bullwhip effect are the demand forecasting and amplification of oeders to the upper level of the supply chain. The best illustration of the bullwhip effect is the well known...
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...Supply chain game – Lego game Supply chain game – Lego game XXXXXX Casper XXXXXX Casper Supply Chain Management Supply Chain Management Introduction First and foremost the game provided an understanding of the bullwhip effect and furthermore also insight to the challenges of distributing material and information within a supply chain. I have applied the cause-effect theory in order to obtain an understanding of the root causes, the reasons, to why the bullwhip effect, the result, occurred in the supply chain in the LEGO game (Slack, Chambers and Johnston, 2010). Hence the structure of this assignment will be based upon a cause-effect analysis which treats the experienced bullwhip effect as the result. Thus this assignment describe the causes of this effect identified through reflecting upon the LEGO supply chain game played September 25, 2015. Bullwhip effect The bullwhip effect is unexpected distortion of information observed in a supply chain and can be caused by demand fluctuations e.g. variability, which is processed and amplified through the companies in a supply chain. The demand fluctuations are amplified as they are processed upstream in the supply chain and hence the swings, the demand order variability, of the “bullwhip” can be expected to increase the farther upstream in the supply chain a company is located (Lee, Padmanabhan and Wheng, 1997). Reflections and learning outcome from the game I will divide this reflection and learning...
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...What is the Bullwhip Effect? 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. EXPLAINATION OF THE BULLWHIP EFFECT The graphical representations above show the bullwhip effect between two supply chain partners. It can be seen that the Distributor orders to the factory experience demand fluctuate far...
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...Matthias Spleit (0966118) The Bullwhip Effect What is the bullwhip effect? The bullwhip effect is an observed phenomenon in supply chains and points out the magnification of demand fluctuations, especially when demand increases and decreases. The main reason for this phenomenon is a lack of demand information in the supply chains. FORRESTER was the first who mentioned the bullwhip effect in the literature.1 He studied the behaviour of dynamic systems in industrial organisations, by analysing different parameters like stock sizes, production rates and time delays and demonstrated the effects on these parameters, whenever modifications are applied. The outcome of his analysis was, that in a simple production- and distribution system, a small interruption or fluctuation in demand at the retail stage can cause a significantly stronger fluctuation in the whole system.2 These fluctuations have first been considered to be unavoidable and beyond the control of the respective companies. Forrester cleared up that misunderstanding on the basis of a four level dynamic system, showing the organisational structure of a production- and distribution system: Illustration: Bullwhip Effect3 1 2 Forrester, J. (1972), 21ff. Forrester, J. (1972), 22. 3 http://sinaslogisticsblog.blogspot.co.at/2010/04/bullwhip-effect.html (13.01.2015) 1 Matthias Spleit (0966118) There are four main operational factors that stimulate the bullwhip effect:4 1. fixed costs in production, ordering...
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...REVIEW OF SUPPLY CHAIN MANAGEMENT CONCEPTS AND THE BULLWHIP EFFECT H.M. Lai1 1Faculty of Engineering, Universiti Putra Malaysia, 43400 Serdang, Selangor, Malaysia. ahiu_mun@hotmail.com Keywords: Supply Chain Management, Bullwhip Effect, Inventory. Abstract. In recent years, the application of supply chain management in organization has become very popular. Business organizations today increasingly use the vital role of supply chain management to compete. This paper presents the basic concepts and literature review of supply chain management. The practice of supply chain management is guided by some basic underlying concepts that have not changed much over the centuries. This paper also discusses the common problem in supply chain management known as the bullwhip effect. 1. Introduction At present, the way the business is done has undergone radical transformation due to ever increasing expectations of consumers. The realization of importance of collaboration and integration among the partners has led to the idea of supply chain management. Organizations have realized the essentialness of an effective and efficient management of supply chain for present and future survival. Hence, the importance of supply chain management has grown over a period of time and plenty of planning models are now practiced by organizations across the globe. In adopting supply chain management, organizations must carry out a consistent set of management practices. 2. The Concept of Supply Chain Management...
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...1. Supply Chain Management The objective of supply chain management is to provide a high velocity flow of high quality, relevant information that will enable suppliers to provide an uninterrupted and precisely timed flow of materials to customers. In other worlds it would be responsible to put the right product and quantity, at the right place and at the right time. The logistic performance has a strong influence over the financial performance of the industrial companies and commercial. With the development, together with development of the information technology, among other factors, show up the possibility of supply chain managed, which is know as Supply Chain Management. It is very important to understand first the objectives of the Supply Chain Management therefore give a close up at the Bullwhip Effect and understand its causes and understand how to minimize it. 2. Bullwhip Effect Supply Chain coordination functions well as long as all stages of the chain take actions that together increase total supply chain profits. Each part of the chain should maintain its actions in a good relation to other participants and the supply chain in general and make decisions beneficial to the whole chain. If the coordination is weak or does not exist at all, a conflict of objectives appears among different participants, who try to maximize personal profits. Besides, all the relevant information for some reason can be unreachable to chain participants, or the information can get...
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...Distortion in Supply Chain: A Simulation Approach to Quantifying the Bullwhip Effect 1 1 Oyatoye, E.O and 2Fabson, T.V.O Department of Business Administration University of Lagos, Akoka-Yaba, Lagos, Nigeria 2 Telsy Value Consult, Onike Road, Iwaya, Lagos, Nigeria Corresponding Author: Oyatoye, E.O ____________________________________________________________ ______________________________ Abstract Supply chain exists due to the fact that it is difficult for any company to provide all that is required from raw materials to final products and at the same time get the products to the end users. Successful supply chain management requires a change from managing individual functions to integrating activities into key supply chain process; hence, accurate information is of essence. One of the key factors that can adversely affect effective and efficient supply chain process is information distortion. Demand forecasting and ordering policies have been recognized as two key causes of bullwhip effect in supply chain management. This study explored the simulation approach in quantifying the effect of bullwhip in supply chain, using various forecasting methods. ____________________________________________________________ ______________________________ Keywords: information distortion, supply chain, simulation, quantifying bullwhip effect, forecasting methods ____________________________________________________________ ______________________________ I TRODUCTIO Supply chain is the...
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...4 1.0. Supply Chain Management Intense competition in today’s global marketplaces, products with shorter life cycles, andsuperior expectations of customers have compelled business entities to invest in, and focus ampleattention on, their supply chains. Supply chain management has already become corecompetencies of various business enterprises such as: Apple, Intel, Samsung, P&G, Wal-Mart, Nike, Toyota and Audi which gives them the competitive advantage over their rivals. (Gartner,2012)The concept of supply chain management has become ever popular in today’s business world asit exists in both service and manufacturing organizations. It can be defined as: “ A set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, sothat merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system wide costs while satisfying service level requirements. ” (Edmund P. & Kim W., 2013)Supply chain is basically an integration of independent organizations associated together as agroup through products and services where group associates jointly or separately add value on inorder to deliver them to end customers and meet their the needs. It consists of numerouselements that are connected together through the movement of products along it. Customer, planning, purchasing, inventory, production and transportation are the components of a simplesupply chain where it...
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