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The bullwhip effect in supply chains

supply chain management

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The bullwhip effect in supply chains

  1. 1. Presentation By: Gagandeep Sohanpal Vaibhav Kakkar Sanchit Bahl Gaurav Dora
  2. 2.  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
  3. 3. In a supply chain plagued with Bullwhip effect, the distortion in information is escalated as it moves up in the chain Some symptoms of Bullwhip are: 1. Excessive inventory 2. Poor product forecast 3. Insufficient capacities 4. Long backlogs 5. Uncertain Product planning
  4. 4. BULLWHI P EFFECT DEMAND FORECASTING UPDATING ORDER BATCHING PRICE FLUCTUATION RATIONING AND SHORTAGE GAINING
  5. 5. Based on the order history Amount of safety stock contributes bullwhip effect Lead time longer fluctuation more significant
  6. 6. Two types • Periodic Ordering  Inventory systems based on order cycles  Reduces order, billing and shipment cost  amplifies variabilty and contributes bullwhip • Push  Company experiences regular surges in demand All customers orders should be spread out evenly throughout a week or month
  7. 7. 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 themselves
  8. 8. 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
  9. 9.  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 etc.  Multiple organizations in a supply chain should use the same forecasting method.  Bypassing the downstream site like in case of Dell.  Just-in-time replenishment.
  10. 10. Variable, non-periodic schedule from the downstream. 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.
  11. 11. Reduce the frequency and level of wholesale price discounting. No exaggeration of orders.
  12. 12. THANK YOU

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