{"id":465,"date":"2016-07-13T13:06:57","date_gmt":"2016-07-13T18:06:57","guid":{"rendered":"http:\/\/blogs.uww.edu\/prasad\/?page_id=465"},"modified":"2016-07-13T13:06:57","modified_gmt":"2016-07-13T18:06:57","slug":"the-bullwhip-effect-in-supply-chains","status":"publish","type":"page","link":"https:\/\/blogs.uww.edu\/prasad\/teaching\/independent-study\/the-bullwhip-effect-in-supply-chains\/","title":{"rendered":"The bullwhip effect in supply chains"},"content":{"rendered":"

Hau L. Lee, V. Padmanabhan and Seungjin Whang<\/p>\n

Sloan Management Review<\/h2>\n

1997, Spring 1997, 93-102<\/p>\n

1)\u00a0\u00a0\u00a0\u00a0\u00a0 What is the Bullwhip effect?<\/p>\n

    \n
  1. a) With steady consumption, it is the amplification of demand order variability as information moves through the supply chain<\/li>\n
  2. b) Causes<\/li>\n
  3. i) Demand forecast updating<\/li>\n<\/ol>\n

    (1)\u00a0\u00a0 Every company the chain has a forecast<\/p>\n

    (2)\u00a0\u00a0 Readjustments are made due to demand signal processing<\/p>\n

      \n
    1. ii) Order batching<\/li>\n<\/ol>\n

      (1)\u00a0\u00a0 A supplier accumulates orders and batches them before sending them to a supplier<\/p>\n

      (2)\u00a0\u00a0 MRP systems have monthly or weekly runs causing demand surges<\/p>\n

      (3)\u00a0\u00a0 Economics of transportations is a cause of batching<\/p>\n

      (4)\u00a0\u00a0 Overlapping order cycles: all customers place orders at the same time<\/p>\n

      iii)\u00a0\u00a0\u00a0\u00a0 Price Fluctuation<\/p>\n

      (1)\u00a0\u00a0 Causes customers to stockpile<\/p>\n

      (2)\u00a0\u00a0 Sale prices, coupons and other promotions<\/p>\n

        \n
      1. iv) Rationing and Shortage gaining<\/li>\n<\/ol>\n

        (1)\u00a0\u00a0 When demand exceeds supply<\/p>\n

        (2)\u00a0\u00a0 Allocating\u00a0 a percentage of customer\u2019s order<\/p>\n

        (3)\u00a0\u00a0 Causes gaming: customers order more than they need, take the percentage and cancel the remaining order.<\/p>\n

          \n
        1. c) Symptoms of variations<\/li>\n
        2. i) Excessive inventory<\/li>\n
        3. ii) Poor product forecasts<\/li>\n<\/ol>\n

          iii)\u00a0\u00a0\u00a0\u00a0 Insufficient\/Excessive capacities<\/p>\n

            \n
          1. iv) Poor customer service due to<\/li>\n<\/ol>\n

            (1)\u00a0\u00a0 Long back logs<\/p>\n

            (2)\u00a0\u00a0 Unavailable products<\/p>\n

              \n
            1. v) Uncertain production planning<\/li>\n<\/ol>\n

              (1)\u00a0\u00a0 Excessive revisions<\/p>\n

                \n
              1. vi) High costs for corrections<\/li>\n<\/ol>\n

                (1)\u00a0\u00a0 Expedited shipments<\/p>\n

                (2)\u00a0\u00a0 Overtime<\/p>\n

                2)\u00a0\u00a0\u00a0\u00a0\u00a0 How to solve for distorted information<\/p>\n

                  \n
                1. a) Managers should understand the bullwhip effect so they can counteract it<\/li>\n
                2. b) Improve supply chain performance by coordinating information<\/li>\n
                3. c) Avoid multiple demand forecast updates<\/li>\n
                4. i) Make demand data at a downstream site available at upstream sites<\/li>\n
                5. ii) Consider collaborative planning<\/li>\n<\/ol>\n

                  iii)\u00a0\u00a0\u00a0\u00a0 Consider data interchange such as EDI<\/p>\n

                    \n
                  1. iv) Consider \u201cconsumer direct\u201d scheme<\/li>\n
                  2. v) Improve operational efficiency to reduce long\/variable lead times<\/li>\n
                  3. d) Break order batches<\/li>\n
                  4. i) Consider data interchange such as EDI to reduce administrative costs<\/li>\n
                  5. ii) Consider third party logistics carriers to and freight consolidation to reduce less-than-container load transport costs<\/li>\n
                  6. e) Stabilize prices<\/li>\n
                  7. i) Reduce frequency and level of wholesale price discounting<\/li>\n
                  8. ii) Use ABC costing for greater cost transparency<\/li>\n<\/ol>\n

                    iii)\u00a0\u00a0\u00a0\u00a0 Implement \u2018every day low price\u2019 scheme<\/p>\n

                      \n
                    1. f) Eliminate Gaming in shortages<\/li>\n
                    2. i) Allocate a proportion of past orders<\/li>\n
                    3. ii) Share capacity and inventory information<\/li>\n<\/ol>\n

                      iii)\u00a0\u00a0\u00a0\u00a0 Tighten liberal return policies<\/p>\n

                       <\/p>\n","protected":false},"excerpt":{"rendered":"

                      Hau L. Lee, V. Padmanabhan and Seungjin Whang Sloan Management Review 1997, Spring 1997, 93-102 1)\u00a0\u00a0\u00a0\u00a0\u00a0 What is the Bullwhip effect? a) With steady consumption, it is the amplification of demand order variability as information moves through the supply chain b) Causes i) Demand forecast updating (1)\u00a0\u00a0 Every company the chain has a forecast (2)\u00a0\u00a0 […]<\/p>\n","protected":false},"author":3916,"featured_media":0,"parent":118,"menu_order":0,"comment_status":"open","ping_status":"open","template":"","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"class_list":["post-465","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/pages\/465","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/users\/3916"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/comments?post=465"}],"version-history":[{"count":1,"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/pages\/465\/revisions"}],"predecessor-version":[{"id":466,"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/pages\/465\/revisions\/466"}],"up":[{"embeddable":true,"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/pages\/118"}],"wp:attachment":[{"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/media?parent=465"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}