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About this sample
About this sample
Words: 1002 |
Pages: 2|
6 min read
Published: Nov 19, 2018
Words: 1002|Pages: 2|6 min read
Published: Nov 19, 2018
An unmanaged supply chain is not inherently stable. Demand variability increases as one moves up the supply chain away from the retail customer, and small changes in consumer demand can result in large variations in orders placed upstream. Eventually, the network can oscillate in very large swings as each organization in the supply chain seeks to solve the problem from its own perspective. This phenomenon is known as the bullwhip effect and has been observed across most industries, resulting in increased cost and poorer service.
Sources of variability can be demand variability, quality problems, strikes, plant fires, etc. Variability coupled with time delays in the transmission of information up the supply chain and time delays in manufacturing and shipping goods down the supply chain create the bullwhip effect.
The following all can contribute to the bullwhip effect:
Somewhat otherwise reasons of rising the bullwhip effect:
Taking under is being spent by above-mentioned reasons for the most remark on the remark for predicting of demand. This reason is most often re-inspected with the usage of various methods and technologies, as well as models in order predicting the explanation for influence of demand for the bullwhip effect and at the same time for managing the supply chain.
It is possible to infer from analyzing factors contributing to rising of the bullwhip effect, grasping it in general - this effect is the effect of the bad flow of information in the chain of supplies. Enumerated in literature many tolerating possibilities are for reducing it.
For instance three various options are possible whom the usage will reduce in the supply chain or almost will preclude the bullwhip effect:
While the bullwhip effect is a common problem, many leading companies have been able to apply countermeasures to overcome it. Here are some of these solutions:
Today’s Wall Street Journal has a noteworthy front-page article about the “bullwhip” effect, as it is starting to play out in businesses as the economy recuperates. What’s the bullwhip effect? The WSJ article explains: «This phenomenon occurs when companies significantly cut or add inventories. Economists call it a bullwhip because even small increases in demand can cause a big snap in the need for parts and materials further down the supply chain».
For more details about the bullwhip effect? and what causes it — see the classic 1997 MIT Sloan Management Review article on the topic, “The Bullwhip Effect in Supply Chains.” In that article, Hau L. Lee, V. Padmanabhan and Seungjin Whang argue that the bullwhip effect results from rational behavior by companies within the existing structure of supply chains. As a result, companies that want to mitigate the impact of the bullwhip effect need to think about modifying structures and processes within the supply chain – in order to change incentives. The authors explain four major causes of the bullwhip effect — as well as ways to counteract it.
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