BULL WHIP EFFECT

BULLWHIP EFFECT
Through the numerous stages of a supply chain; key factors such as:
Time
Supply of Order Decisions
Demand for the supply,
Lack of communication
Disorganization
Can result in one of the most common problems in supply chain
management. This common problem is known as the Bullwhip Effect
BULLWHIP
EFFECT
The bullwhip effect can
be explained as an
occurrence detected by
the supply chain where
orders sent to the
manufacturer and
supplier create larger
variance then the sales
to the end customer
 WHAT CONTRIBUTES TO BULLWHIP?
There are many factors said to cause or contribute to the bullwhip effect in supply chains; the
following list names a few:

Disorganization between each supply chain link; with ordering larger or smaller amounts of a
product than is needed due to an over or under reaction to the supply chain beforehand.

Lack of communication between each link in the supply chain makes it difficult for processes to
run smoothly.  Managers can perceive a product demand quite differently within different links
of the supply chain and therefore order different quantities.

Free return policies; customers may intentionally overstate demands due to shortages and then
cancel when the supply becomes adequate again,  without return forfeit retailers will continue
to exaggerate their needs and cancel orders; resulting in excess material.
 WHAT CONTRIBUTES TO BULLWHIP?
Order batching; companies may not immediately place an order with their supplier; often
accumulating the demand first.  Companies may order weekly or even monthly.  This creates
variability in the demand as there may for instance be a surge in demand at some stage followed
by no demand after.

Price variations – special discounts and other cost changes can upset regular buying patterns;
buyers want to take advantage on discounts offered during a short time period, this can cause
uneven production and distorted demand information.

Demand information – relying on past demand information to estimate current demand

information of a product does not take into account any fluctuations that may occur in demand
over a period of time.
EXAMPLE
WAREHOUSING
WAREHOUSING
Part of firms logistics system that stores products at
and between point of origin and point of consumption.
Term “Warehousing” is referred as transportation at
zero miles per hour
Warehousing provides time and place utility for raw
materials, industrial goods, and finished products,
allowing firms to use customer service as a dynamic
value-adding competitive tool.
WAREHOUSING OPERATIONS
Warehousing Operations involve three major
activities:

 INBOUND ACTIVITIES
 PROCESS ACTIVITIES
 OUTBOUND ACTIVITIES
DESIGN CONSIDERATION

Ideal Facility for Pure Supplier

Warehouse Space
Consolidation
Requirements
(Full Pallet Movement)
BENEFITS OF WAREHOUSE
MANAGEMENT
 Provide a place to store & protect inventory
 Reduce transportation costs
 Improve customer service levels
 Complexity of warehouse operation depends on the
number of SKUs handled & the number of orders
received & filled.
 Most activity in a warehouse is material handling.
CONSOLIDATION
CROSS DOCKING
CROSS
DOCKING
BREAK BULK
PRIVATE WAREHOUSES
OPERATED by a company for shipping and storing its own
products
OWNED AND MANAGED- manufacturers or traders
CONSTRUCTION- Farmers near their fields, Wholesalers and
Retailers near their business center's and Manufacturers near
their factories
COMPANIES – Stable inventory levels and long run expectations
SUITABILITY- Firms that require special handling and storage
features and want to control design and operation of the
warehouse
 PUBLIC WAREHOUSES
Provide storage and physical distribution services on rental basis

Used by SMALL FIRMS and LARGE FIRMS

Organizes to provide storage facilities to traders, manufacturers, agriculturists in return for a

storage charge

 Licensed by Govt

OWNED and OPERATED – Central Warehousing Corporation and State Warehousing Corporation

SUITABILTY – seasonal production or low volume storage needs, companies with inventories
maintained in many locations, firms entering new markets

OWNER –stands as an agent of goods

GOVERNMENT WAREHOUSES
OWNED, MANAGED AND CONTROLLED -Central or State
Governments or public corporations or local authorities
EXAMPLES- Central Warehousing Corporation of India,
State Warehousing Corporation and Food Corporation of
PAKISTAN
If customer cannot pay rent within specified time authority
can recover rent disposing of goods
 BONDED WAREHOUSE
Licensed to accept imported goods for storage before payment of customs duty
Imported merchandise is stored and released only after payment of appropriate taxes
Cigarettes, Generators, Other products are stored
Owned and Operated – PORT TRUSTS
Acts in two capacities viz LANDLORD and BAILEE OF GOODS. As landlord provides storage
facilities on rent
As bailee of goods take reasonable care to handle and store goods as it has lien on goods under
care for charges of its services
Owner can sell goods wholly or in part by endorsing a warrant
Facilitate enter pot trade- importer need not pay the import duty
DISTRIBUTION CENTRES
Designed to move goods
Large and highly automated
Receive goods from various plants and suppliers, take
orders, fill them efficiently deliver to customers quickly
Located near the market owned or leased by manufacturers
Access to transport networks
CLIMATE CONTROLLED WAREHOUSES
Handle storage of many products including need special
handling conditions
Freezers for frozen products, humidity controlled
environment for delicate products, produce or flowers, etc.
SUMMARY
1PL- Having need for movement of Goods
2PL- Performing physical movement of Goods
3PL- Providing extra services along with movement of
Goods
4PL- Managing 3PLs on behalf of client, providing
consultancy services
5PL- e-business and latest technology development