Professional Documents
Culture Documents
Bullwhip 9chapter 8)
Bullwhip 9chapter 8)
Bullwhip 9chapter 8)
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Examples:
Procter & Gamble (P&G) and Diapers
Reasonably stable market at consumer level Substantial variability in orders that P&G placed on suppliers (such as 3M) P&G coined the bullwhip effect
Some variability in sales Bigger swings at the orders of resellers Even bigger swings for orders from printer division to the IC division
Examples:
(cont.)
$30B opportunity for streamlining grocery supply chain More than 100 days of inventory supply
20
15 10 5 0 Time Wholesalers Orders to Manufacture
20
15 10 5 0 Time Manufacturers Orders to Supplier
Order Quantity
15
20
20 15
10
5 0
10
5 0 Time
Demand Forecast Updating Order Batching Price Fluctuation Rationing and Shortage Gaming
Order Batching
Economies of scale in ordering costs and manufacturing setups lead to batching Periodic planning and ordering as part of MRP and periodic review systems Economies of scale in transportation (full truckload rates) Push ordering motivated by short term financial performance measures
2007 Pearson Education
Price Fluctuation
Quantity discounts and advance purchases Variance of buying quantities bigger than variances in consumption rate Bullwhip Effect due to Seasonal Sales of Soup
Order Quantity 800 600 400 200 0 1 Weeks 52 Shipments from Manufacturer to Distributors Retailers Sales
Wide
swings result in capacity adjustment costs, high inventory costs, transport diseconomies Trade promotions and supply chain management = The dumbest marketing ploy ever!
2007 Pearson Education
Information Sharing:
Use
of Point-of-Sale (POS) data Electronic Data Interchange (EDI) Internet Computer Assisted Ordering
Operational Efficiency:
2007 Pearson Education
Lead
time reduction
Information Sharing:
EDI Internet
for Truck Load Assortment Consolidation Mixed SKUs Third Party Logistics
Operational Efficiency:
Reduction
Replenishment Program
(CRP)
Operational Efficiency:
Everyday
data
Allocation
based on past sales Placing orders ahead of peak season Stricter return and order cancellation policies
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Performance Categories
Four major categories: time, quality, cost, and supporting metrics.
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