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Article 18 - manufacturing and replenishing It amplifies...

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Article 18: The Bullwhip Effect in Supply Chains Junko Nichols 1. Key takeaways: •The Bullwhip Effect is the result of 1) Demand Forecast updating frequency a. Solution i. Information: Eliminated by usage of EDI, CAO, POS ii. Alignment: VMI, Direct to customer iii. Operational eff: Lead time reduction, Echelon Based inventory Control 2) Order Batching a. Solution i. Information: Eliminated by usage of EDI, Internet ordering ii. Alignment: Discount of FTL assortments, consolidation, logistics outsourcing iii. Operational eff: EDI, CAO 3) Price fluctuation a. Solution i. Alignment: CRP, EDLC ii. Operational eff: EDLC ABC 4) Rationing and shortage gaming a. Solution i. Information: Sharing sales capacity and inventory data ii. Alignment: allocation based on past sales 2. Applicable SC principles: • Coordination in a supply chain. The Bullwhip Effect results when a supply chain is not coordinated and each stage of the chain acts independently in forecasting, ordering,
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Unformatted text preview: manufacturing and replenishing. It amplifies the demand fluctuation from the customer to upstream stages exponentially through the supply chain, and hurts the performance of the supply chain. • Forecasting error. In the process of the Bullwhip Effect, the demand forecast is not made based on the true demand data, but is made by each stage of the supply chain based on the downstream entity’s records. CAT: Caterpillar used EDI with all its suppliers. This makes the communication fast and easy. By sharing the demand information with supplier, Caterpillar gets the best price. We also use VMI to have an effective supply chain. The supplier overseas have to setup a VMI, this makes the cost comparison between local supplier and overseas supplier easy....
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