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Bullwhip effect is a phenomenon in Forecast
driven distribution channels
It is the increase in the variability of order as it
moves from the Customer to the Manufacturer
In a supply chain plagued with Bullwhip effect, the
distortion in information is escalated as it moves up in the
Some symptoms of Bullwhip are:
1. Excessive inventory
2. Poor product forecast
3. Insufficient capacities
4. Long backlogs
5. Uncertain Product planning
Based on the order history
Amount of safety stock contributes
Lead time longer fluctuation more
• Periodic Ordering
Inventory systems based on order cycles
Reduces order, billing and shipment cost
amplifies variabilty and contributes bullwhip
Company experiences regular surges in demand
All customers orders should be spread out
evenly throughout a week or month
Forward buy – items were bought in
advance of requirements
Forward buying has a negative effect
Forward buy a good idea-If cost of holding
inventory is less than the price differnetial
“the Dumbest marketing ploy ever “ as
price fluctuation is set by marketers
EXCESS INVENTORY AND UNNECESSARY CAPACITY INCREASE
WHEN DEMAND COOLS,ORDERS DISAPPEAR & CANCELLATION STARTS
CUSTOMER EXAGGERATES THEIR REAL NEEDS
RATIONS PRODUCT TO CUSTOMERS
PRODUCT DEMAND EXCEEDS SUPPLY
Forecasting at each level of supply chain.
Processing the demand input from the
immediate downstream member.
The downstream data should be made
available to the upstream site – VMI/CRP
Companies using VMI are P&G, Nestle, HP
Multiple organizations in a supply chain
should use the same forecasting method.
Bypassing the downstream site like in case of
Variable, non-periodic schedule from the
Total Cost = Ordering Cost + Carrying Cost
Use of Electronic Data Interchange(EDI).
Use of full-truckloads – Mixed-SKU(P&G),
Composite Distribution(eg. TESCO,
Sainsbury), third party logistics.
Reduce the frequency and level of
wholesale price discounting.
No exaggeration of orders.