Supply Chain Management

Quiz 4

Umar Farooq 17U00609

Q1. Explain Bullwhip effect, and quote example of “Shezan juices” to support your answer.

Ans. The bullwhip effect is a supply chain phenomenon describing how small fluctuations in

demand at the retail level can cause progressively larger fluctuations in demand at the wholesale,

distributor, manufacturer and raw material supplier levels. The effect is named after the physics

involved in cracking a whip. When the person holding the whip snaps their wrist, the relatively

small movement causes the whip's wave patterns to increasingly amplify in a chain reaction.

When stages in a supply chain forecast based on the orders they receive, any variability in

customer demand increases as orders move up the supply chain to manufacturers and suppliers.

In supply chains with the bullwhip effect, the orders placed are the basic means of

communication between the various levels. Each stage believes that their main function within

the supply chain is to fulfill the orders placed by their intermediary. Hence, each stage considers

its demand as the flow of orders received and makes a forecast based on such a scenario, a small

change in customer demand is magnified as the supply chain moves up in the form of orders for

customers. Consider the impact of a random increase in customer demand on the retailer. This

random increase is a growth trend. This interpretation will cause the retailer to ask for more than

the observed increase in demand as the retailer expects growth to continue in the future and

therefore receives orders to meet the expected growth in the future.

For example, if the demand of Shezan juices is increased by the public, due to summers, or any

other reason. The whole supply chain system will be disrupted due to that. The distribution,
production, transportation, sourcing, and any other thing included in the Supply Chain of the

juices will get an impact, and will be even larger than at the retail level.

Q2. Describe the impact of forecasts based on orders rather than actual customer demand.

Explain your answer using “Khaadi” as an example.

Ans. When stages in a supply chain forecast based on the orders they receive, any variability in

customer demand increases as orders move up the supply chain to manufacturers and suppliers.

In supply chains with the bullwhip effect, the orders placed are the basic means of

communication between the various levels. Each stage believes that their main function within

the supply chain is to fulfill the orders placed by their intermediary. Hence, each stage considers

its demand as the flow of orders received and makes a forecast based on such a scenario, a small

change in customer demand is magnified as the supply chain moves up in the form of orders for

customers. Consider the impact of a random increase in customer demand on the retailer. This

random increase is a growth trend. This interpretation will cause the retailer to ask for more than

the observed increase in demand as the retailer expects growth to continue in the future and

therefore receives orders to meet the expected growth in the future.

For Khaadi, they will need to anlyze the orders of the customers, and then do forecasting. Only

this way they can get the actual picture of the demand of people, and how much will be the sales

in coming days, or months

Q3. To support effective supply chain decisions, what characteristics must the information

have? Explain by taking Metro cash & carry as an example.

Ans. Information is crucial to making good supply chain decisions at all three levels of decision

making, which are; strategy, planning, and operations. Information Technology enables not only
the gathering of these data to create supply chain visibility but also the analysis of these data so

that the supply chain decisions made will maximize profitability.

To support effective supply chain decisions, information must have the following characteristics:

 Information must be accurate

 Must be accessible promptly

 Must be of the right kind

 Must be shared

If we take the example of Metro cash & carry, we will notice that if the above mentioned

characterizes are not included in the information system of it, the things cannot run smoothly.

Everything will be disrupted, and the whole store will have the chance to get non-operational.

That’s the reason why information is very important.

If the accurate information isn’t given to the employees, they cannot be able to make right

decisions. Similarly, if the information is provided late, there can be different consequences of

that. The other two characteristics mentioned are also very important.