Slides 3

The Bullwhip Effect

Global Supply Chain

Management
The Bullwhip Effect

Higher variability in orders

placed by computer retailer to
wholesaler than in actual sales

The Bullwhip Effect

Slide 2

Increasing variability of orders

up the supply chain

The Bullwhip Effect

Slide 3

Fluctuations of Inventory and Backorders

throughout the Supply Chain (Bullwhip)

The Bullwhip Effect

Slide 4

The Bullwhip Effect

Slide 5

Conclusion.
Order variability is amplified up the
supply chain - upstream entities face
higher variability
What you see is not what they (can) see

The Bullwhip Effect

Slide 6

What are the Causes.

Inaccurate demand forecasts
Long cycle times
Volume and transportation discounts
Promotional sales
Changes in prices
Inflated orders
The Bullwhip Effect

Slide 7

Consequences.
Increased inventory levels (higher costs)
Inefficient allocation of resources (people,
trucks, warehouses - higher costs)
Reduced service levels: demand cannot be
fulfilled (lower revenues)
Products unsold or sold at discount (lower
revenues)
The Bullwhip Effect

Slide 8

Fixing the Bullwhip Effect (1)

Actions related to inaccurate demand
forecasts
Forecast demand using adequate info and

forecasting techniques
Plan promotions well and communicate them
through chain
Use every-day-low-(stable) - prices strategy
Avoid panic ordering
The Bullwhip Effect

Slide 9

Fixing the Bullwhip Effect (2)

Actions related to long cycle times
Reduce information lead times by centralizing

demand information
Integrate truly with a vendor managed
inventory approach
Reduce production lead times (supplies,
manufacturing, assembly)
Reduce delivery lead times (from supplier to
manufacturer/assembler through distributor,
wholesaler, retailers to customer)
The Bullwhip Effect

Slide 10

Case: Malt Beverage Game

You are a Malt Beverage retailer and are
ordering from a manufacturer (see case)
Play the corresponding Beergame
try to satisfy demand from your customers

In the meantime
try to keep stock at a safety level of 12

What is the key problem ?

The Bullwhip Effect

Slide 11

Case: Order Model

You see a single player in the supply chain,
run the corresponding order model
You see two players in the supply chain,
run the corresponding order model
What is are the key problems?
How can adequate ordering be achieved?
Or: what would be an adequate strategy?
The Bullwhip Effect

Slide 12