2-IE324_Lecture_week2 - IE 324 Lecture on SCM-II 11 The...

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Unformatted text preview: IE 324 Lecture on SCM-II 11 The Bullwhip Effect Weekly Demand for Barilla Dry Products from Cortese’s Northeast Distribution Center to the Pedrignano CDC IE 324 Lecture on SCM-II IE 324 Lecture on SCM-II 22 The Bullwhip Effect • Barilla Case is not unique. • Procter&Gamble noticed the same phenomenon for Pampers disposal diapers (P&G coined the term “bullwhip effect” – kamçı etkisi) Customer Retailer Distributor Factory Supplier IE 324 Lecture on SCM-II IE 324 Lecture on SCM-II 33 O r d e r V a r i a b i l i ty i n th e S u p p l y C h a i n 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 1 3 5 7 9 11 13 15 17 19 21 W e e k Order F a c to r y D is tr ib u to r W h o le s a le r R e ta ile r C u s to m e r IE 324 Lecture on SCM-II IE 324 Lecture on SCM-II 44 IE 324 Lecture on SCM-II IE 324 Lecture on SCM-II 55 Bullwhip effect gives rise to : • High inventory/lost sales/backlog cost • Low customer satisfaction • Low operational efficiency- under-utilization- overtime- expediting • Unnecessary capacity investment • Swings in working capital • Blaming others; frustration, helplessness IE 324 Lecture on SCM-II IE 324 Lecture on SCM-II 66 Main Factors Contributing to Bullwhip Effect: • Demand Forecasting: – each level of the chain uses an order-up-to level type rule (lead time demand plus safety stock). – A forecasting technique (such as moving average or exponential smoothing) is used to update average and standard deviation for demand – as new demand data becomes available you update those quantities – estimated quantities would have more variability than the process generating the data – of course downstream level’s ordering quantity (a function of order-up-to level) becomes demand for upstream level IE 324 Lecture on SCM-II IE 324 Lecture on SCM-II 77 • Lead Time:...
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This note was uploaded on 05/23/2010 for the course IE 324 taught by Professor T during the Spring '10 term at Middle East Technical University.

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2-IE324_Lecture_week2 - IE 324 Lecture on SCM-II 11 The...

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