Bullwhip Effect Flashcards
Causes of Bullwhip Effect
Overreation to backlogs
Neglecting to order in an attempt to reduce inventory
No communication up and down the SC
No coordination up and down the SC
Delay time for information and material flow
Concequences of Bullwhip Effect
Order variablility is amplified up the SC
Upstream echelons face higher variability
Lower Revenues
Higher Costs
Causes of Bullwhip Effect
Order Batching
Demand forecast updating
Price Fluctuation
Rationing and Shortage Gaming
Order Batching
Larger orders result in more variance.
Order batching occurs in an effort to reduce ordering costs, to take advantage of transportation economies such as fluu truck load economies, and to benefit from sales incentives.
Demand Forecast Updating
Everybody in the chain add a certain percentage to the demand estimates.
The result is no visiblity of true customer demand.
Price Fluctuation
Estimates indicate that 80% of the transactions between manufacturers and distributors in the gocery industry were made in a “forward buy” arrangement.
The Dumbest Marketing ploy ever:
Price Discounts, quanity discounts, coupons, rebates
Rationing and Shortage Gaming
When product demand exceeds supply, a manufacturer often rations its product to customers.
Causes customers to exaggerate demand.
Countermeasures to Demand Forecast Inaccuracies
Providing access to point of sale data.
Channel initiatives
VMI
Coordinated forecasting and replenishment
Countermeasures to Order Batching
Electronic Data Interchange
Computer Aided Ordering
Third Party Logistics
Countermeasures to Shortage Gaming
Allocating units based on past sales.
Share capacity and inventory information to customers.
Countermeasures to Fluctuating Prices
Every Day Low Prices
Activity-based Costing
Distributor is on the downstream side of a manufacturer
True
______ take inventory in bulk from manufacturers and diliver to customers.
Distributor
In a supply chain global optimization is preferred over local optimization.
True
