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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!
As a result!• When demand rises, participants will
increase their orders
• When demand falls, orders fall or stop
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
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
http://photos.travelblog.org/Photos/40711/247612/f/2049462-The-famous-wall-street-bull-0.jpg
http://www.bigtopmania.co.uk/images/peteza_cowboy_bull-whips.jpg