Bullwhip result case study

Technical Planning, Products on hand System, Cause And Result, Supply Sequence

Excerpt coming from Case Study:

Bullwhip impact is a theory that the a greater distance a company gets away from the consumer, the more changing the demand is. This makes simply no sense – it’s like saying the more stocks you have in your collection the more unstable it will be. What goes on is not a bullwhip by any means. Look – a five per cent change in demand is a 5% change in require up the complete stream. In the event the front-line merchant is in collection with the market change, in that case that means everybody in the industry will see a five per cent change in demand. The raw number difference in demand in the supply chain is bigger, but it can still a similar percentage. The producer is actually a bigger company to begin with, it is therefore equipped to handle this change to similar degree that the retailer is definitely. Furthermore, in case the 5% modify at the merchant level includes some part that is specific to that one retailer, compared to the industry transform is going to be much less than five per cent – in other words less unpredictable. Diversification reduce volatility, since you have to understand this on a percentage basis. Looking at raw quantities, when the manufacturer is working at a much larger scale than the specific retailer, makes no impression.

Indeed, a simple look at the description for the bullwhip impact tells me that it is fiction. This can contribute to the bullwhip effect: overreaction to backlogs, neglecting to order in an attempt to lessen inventory, zero communication down and up the supply chain, delay moments for information and material stream (QuickMBA, 2010). If they are the causes, in that case these are the causes. It is not the change in demand that causes the inventory problems at all; it’s the mismanagement with the inventory. The terminology and definition of bullwhip effect pins the blame for the change in require when evidently it is the products on hand management practices, and not the change in demand, that create this kind of effect.

Now, vendor been able inventory can be quite a solution to this kind of “bullwhip effect” if it details the causes. Whenever we take at face worth that change in demand may be the cause, VMI does not impact that. Looking at the additional causes, they relate mainly to terrible communication and mismanaged inventory policy. VMI is, in the event nothing else, a consistent system. The retailer delivers information towards the vendor, and it is the job from the vendor to control the products on hand level of the retailer. This system is used in a few fairly large companies – a lot of grocery store distributors take this responsibility. Pepsi uses this to handle its deliveries to shops – the reps are in charge of for maintaining inventory amounts, based on the need information provided to these people.

The issue with VMI is the fact it locations the onus on managing the inventory on the vendor, which means you need to trust the vendor. If I any convenience retail outlet, I trust Pepsi to keep my refrigerator full. I might trust a few of my other major suppliers as well. They are well-run firms with a global track record of executing this type of program. But I do not trust any company that will not run a VMI system. If perhaps that is not what they do