Bullwhip Effect Causes and Impact. How Can Improved IT Support Reduce Bullwhip Effect
Dnyanesh Sarang
Table of Contents
1 Introduction 2
2 Supply Chain & Bullwhip Effect 2
3 Causes of Bullwhip effect 4
3.1 Demand Forecast Updating 4
3.2 Order Batching 5
3.3 Price Fluctuation 5
3.4 Rationing and shortage gaming 5
4 Impact of Bullwhip Effect 6
4.1 Manufacturing Cost 6
4.2 Inventory Cost 6
4.3 Replenishment Lead Time 6
4.4 Transportation Cost 6
4.5 Level of Product Aavailability 6
4.3 Profitabilityy 7
5 How can improved IT reduce Bullwhip effect 7
5.1 Sharing Point of Sales Data(POS) 8
5.2 Implementing Collaborative Forecasting & Planning (EDI & CAO) ……….. 9
5.3 Designing Single Stage Control of Replenishment (CRP & VMI) 10
5.4 Conclusion 11
References 12
1. INTRODUCTION:
From many years Bullwhip Effect has played crucial role in supply chain management. Proctor & Gamble (P&G) has seen the bullwhip effect in case of supply chain of Pampers diapers, which caused increase in cost and more and more tedious to cope up supply with demand in market.(LPW 2004). Lee, Padmanabhan and Whang (2004) define the bullwhip effect as “the amplification of demand variability from a downstream site to an upstream site” These same authors, Lee, Padmanabhan and Whang (1997),outline four major causes of the bullwhip effect; Demand forecast updating, Order batching, Price Fluctuation, Rationing and shortage gaming respectively. S.Chopra, P.Meindl summarize the impact of bullwhip effect on different performance measure like Manufacturing Cost, Inventory Cost, Replenishment lead time, Transportation Cost, Shipping and receiving cost, Level of pro ...