Bullwhip Effect:
What causes it and using ECR and VMI to counteract its effects
"The bullwhip effect occurs when the demand order variabilities in the supply chain are amplified as they moved up the supply chain" (Lee, Padmanabhan & Wang 1997). The bullwhip effect could be characterized as a kind of a gigantic game of 'telephone,' in which the first message becomes distorted in the retelling, and subsequent transmissions of the information result in greater and greater errors. "The common symptoms of such variations could be excessive inventory, poor product forecasts, insufficient or excessive capacities, poor customer service due to unavailable products or long backlogs, uncertain production planning (i.e., excessive revisions), and high costs for corrections, such as for expedited shipments and overtime" (Lee, Padmanabhan & Wang 1997).
Individuals on the supply chain can only make use of information from the person on the chain immediately before them. Information is often not fully accurate, because even though demand may be consistent within an industry, it can be distorted because of monthly variations of demand; the desire to make orders large enough to fill a shipment truckload; and buying in bulk to save money which interferes with the ability to engage in accurate forecasting. The first step in counteracting the bullwhip effect is the use of Efficient Consumer Response systems (ECR). These computerized systems alleviate some of the asymmetries of information that are the cause of the bullwhip effect. ECR "attempts to integrate all departments and functions across a company...
Bullwhip effect is a theory that the farther a company gets away from the customer, the more variable the demand is. This makes no sense -- it's like saying the more stocks you have in your portfolio the more volatile it will be. What happens is not a bullwhip at all. Look -- a 5% change in demand is a 5% change in demand up the entire stream. If the
BWE In business, one of the most challenging issues is what is known as the Bullwhip Effect (BWE) in the supply chain. This effect means that any demand forecast attempt cannot be accurate, since it is based on potentially inaccurate data. According to Ravichandran (2008), BWE refers to a distortion in the demand forecast related to a noise factor. The demand is therefore inflated and leads to an increase in fixed
ordering strategy is fairly simple, and this is why there were seldom backlogs. Basically, what you want to do is understand the baseline demand. In the real world, we would probably already have this data, but in the simulation we needed to figure that out. So most of the order backlogs occurred initially, and during promotion, when nobody was really certain of demand. Once it was established that demand
The Liabilities of JIT Considering the fact that manufacturers are often engaged in a variety of business models at once, any CEO of one of these companies would need to contemplate what while JIT me be excellent for the make-to-stock productions strategies, it would potentially be problematic for its build-to-order and mass customization strategies as well (Song, Dinwoodie, 2008). The innate uncertainty of mass customization strategies makes JIT as a strategy
Hospital SCM Arnold Palmer Hospital Managing Service, Processes and Supply Chains Hospitals and Supply Chains - Overview Hospital Supply Chains - Advancements Standard Supply Chain Stockless Inventory Vendor Managed Inventory Consignment Automated Point of Use Systems The Next Step in Supply Chain Evolution Arnold Palmer Hospital Supply Chain The Arnold Palmer Hospital is one of the country's leading hospitals for women and children. It is located in Orlando, Florida and is currently a part of a national purchasing group in which it
Tesco's Value Chain Analysis Value chain is defined as the special links that exists between the key value adding activities as well as their interfaces with all of the supporting activities (Lynch,2003). The concept of value chain has for along time been implied as a very strategic tool for evaluation purposes and is used for the purpose of distinguishing the various strengths as well as weaknesses that exists within the value
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