Question Answers

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5 By Adekunle Kehinde
Wang Yi
The Bullwhip Effect

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Bullwhip Effect (1)

• Phenomenon: the variation of demand

increases up the supply chain from
customer to supplier.
• The further away a company from the end
customer, the larger is this variation.
• E.g: Manufacturer—— lowest variation of
demand.
3rd tier——largest variation of demand
Bullwhip Effect (2)

Reasons of occurrence:
• Lead time of information and material
• Batch ordering
• Price fluctuation
• Demand forecast based on orders of
the next tier or historical record
Bullwhip effect (3)

Ways of overcoming it
• Plan to reduce lead time of information and
material (e.g JIT )
• Decrease variability of prices.
• Cooperation with supplier on issues of
demand and capacity.
Customer/retailer Distributor Manufacturer

• Demand surge • extended lead- • insufficient raw

& oscillation time, false materials,
increase in insufficient
demand capacity,
extended lead
time
Inventory velocity & Information velocity

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Inventory velocity

• The speed at which business can moves its

stock.
• IV = cost of goods sold
Average inventory for the period

“Inventory velocity is one of a handful of key

performance measures we watch very closely. It
focuses us on working with our suppliers to keep
reducing inventory and increasing speed.”…Michael
Dell
Information velocity

The speed of information flow about a

product in a market…wiktionary
These importance of these 2 velocities are:
• It helps in determining / improving
profitability
• Helps in determining / improving ROI
• Helps in eradicating obsolete products in
the warehouse
• It provides more predictable supply chain
Strategic Partnering

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Strategic Partnering (1)

• An formal alliance between two

commercial enterprises
• Formalize by contrast and form a legal
partnership
• Maximize benefits of operation by utilize
other company’s strengths to make both
stronger
Strategic Partnering (2)

Aims:
• Take a long-term perspective on needs,
costs and solutions.
• Involve shared risks, costs and rewards.
• Have agreed problem resolution methods.
• Have join governance arrangements.
• Be capable of change and development.
E-business

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E-business

E-
commerc
e

E-
business
E- E-
collabora procurem
tion ent
Impacts on SC
• It helps supply chain network partners to identify &
respond quickly to changing customer demand
over the internet
• It allows companies to use internet for procuring
direct or indirect materials
• It helps companies build more value added
services
• Less documentation & human contact
• Replaces inventory with information
– Reduces logistics & inventory cost
More impacts
• Fast payment channel
• It gives competitive advantage by sharing
the same database system
• It allows monitoring of demand in real-time
• Boost efficiency
• Reduce bullwhip effect
Effects on Macro-economy

• Improves/reduces monetary value

– Less inflation, more stable economic output,
shareholder value
• It reduces product price
– Globalization, logistics costs, production
volatility
• Labor savings
– Increase unemployment
CPFR

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CPFR

• CPFR: Collaborative Planning, Forecasting and

Replenishment
• Enhance supply chain integration
• Shared information between suppliers and retailer
• Seek cooperative management of inventory
through joint visibility and replenishment of
products
• Increase efficiency, update inventory continuously
and decrease expenditures
5 4
3 Thanks for attention
Any question?
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