BA470-Value Chain Management- Bullwhip Effect (Chapter 10)
Using resources in addition to the textbook, identify three ideas for minimizing the bullwhip effect in supply chain management. Cite your sources. Use the Assignment Rubric found in the General Module as a guide.
The Bullwhip Effect
Also known as the Forrester effect, the bullwhip effect is defined as the distortion of demand travelling upstream within the supply chain right from the retailer to the wholesaler and to the manufacturer. This is caused by the variance of orders that might be larger as compared to that of sales.
Eliminating batch orders is the first step towards eliminating the bullwhip effect, which is whereby larger product quantities are less frequently bought by businesses. This can result in excess if they overshoot the demand of customers besides causing delays in responding to dramatic and quick rise in demand. Therefore, utilizing a more regular system of ordering for small orders makes it easier in keeping up with the buying patterns (Yang et al., 2021). Also, the interchange of electronic data and close relationships with the suppliers can assist a business in quickly placing orders and receiving shipments before stockouts occur.
The bullwhip effect can also be eliminated by streamlining the supply chain. Braz et al (2018) posit that reducing the number of tiers as well as the number of suppliers within the supply chain can significantly help in facilitating better communication across teams in addition to decreasing the swing responsible for creating the bullwhip effect.
Minimizing sales and discounts can also help to eliminate the bullwhip effect. This is because it would allow an organization to maintain a steady price point even during fluctuations within the market, in addition to encouraging a regular stream of customer demand within an organization’s supply chain.
Braz, A. C., De Mello, A. M., de Vasconcelos Gomes, L. A., & de Souza Nascimento, P. T. (2018). The bullwhip effect in closed-loop supply chains: A systematic literature review. Journal of cleaner production, 202, 376-389.
Yang, Y., Lin, J., Liu, G., & Zhou, L. (2021). The behavioural causes of bullwhip effect in supply chains: A systematic literature review. International Journal of Production Economics, 236, 108120.