Topic : Mitigation of Bullwhip Effect: A

study based on different information

sharing strategies of a food Industry.

BULLWHIP EFFECT

 IP-1701033 ( NAFIUL HASAN HASIB )

 IP-1701052 ( KHONDAKER ASHRAFUR RAHMAN )
 IP-1701021 ( MEHEDI HASSAN RIAD )
 IP-1701034 (MD. RIFAT ALI)
 What is Bullwhip Effect?

The increase or decrease in

variations in a supply chain
is generally known as the
bullwhip effect, the whipsaw
or the whiplash effect.

 An occurrence detected
by the supply chain
 Interrupt the smoothness
of the supply chain
process
Example of The Bullwhip Effect
 Background

 Lee et al., (2004) mentioned that Forrester was the first person
who documented the phenomenon of bullwhip effect

 The term "bullwhip effect" was coined by Procter & Gamble

 Warburton, Hodgson and Kim (2004) developed equations to

compute the order and demand to nullify the bullwhip effect
using a generalized order-up-to (OUT) policy.

 Simulation also has been used in supply chain management to

study the bullwhip effect.(BEER GAME)
 Information Sharing

 Information sharing means that people or other entities pass

information from one to another. Many high-speed
information systems are now being used in business
operations. For example:

1. Enterprise Resource Planning (ERP)

2. Electronic Data Interchange (EDI)
 Types of Information

 Inventory level
 Proper Ordering Information
 Cause of Certain Demand Increase
 Accurate Sales Information
 Mail Delays
 Material in Shipping Delays
 Immediate Upstream Suppliers’ Backlog
 Information Quality

 Information quality problems are routine in modern supply

chains. And the increased complexity and lack of flexibility
within an information system may cause information quality
problems.

 Information quality has different dimensions like accuracy,

timeliness, precision, reliability, currency, completeness and
relevancy.
 Obstacles of Information Sharing

If there is no proper channel of information passage, this leads

to inefficiency.

 Observation notes and interview transcripts were analyzed to

identify incidents when group members erroneously believed
they had shared information effectively and were
collaborating successfully.
 Obstacles of Information Sharing

 Using the beer game, Sterman (1989) demonstrated that the

players systematically misinterpret feedback and
nonlinearities, and underestimate the delays between action
and response.

The study of simulations developed in Microsoft Excel by

Adams (2008) to assess the impact of using simple adjustment
heuristics based on information about inventory levels, orders in
mail delays, materials in shipping delays, and the immediately
upstream supplier's backlog.
 Evaluation of Information Sharing

 Sammidi (2008) contains the detailed work. The objective is

to determine if providing all information about inventory
levels and components along the supply line into an ordering
strategy is superior to the JIT pull strategy and the use of
POS data.
 Summary of detailed work:
1.7 cases are analyzed
2. First five cases demonstrate the reduction in bullwhip
effect as more and more information is interpreted into the
supply line.
 Evaluation of Information Sharing

3. Case 6 is pull strategy, which does not adjust for either stock
or supply line.
4. Case 7 is the complete exchange of data between the
members of the supply chain, which eliminates the bullwhip
effect.

However, Case 6 and Case 7 both require discipline and at times

are not easy for companies to follow. So best suited strategy is
case 5 where all the information factors are shared.
 Avoid multiple demand forecast Updates:

 Data should be complete as

point-of-sale (POS) data.
 Supply Chain partners can use
Electronic Data Interchange
(EDI).
 Vendor-managed-inventory
(VMI) can be used for consumer
products industry.
 “Consumer direct” program can
be launch to mitigate Bullwhip
effect.
 Break Order Batches:

 Companies need to devise strategies that lead to smaller

batches or more frequent supply.
 High cost of placing order should be diminished.
 Using EDI can lower the transaction costs.
 Reduce the cost of paperwork in generating order.
 Stabilize Prices

 Reduce both the frequency and the level of wholesale price

discounting.
 An uniform wholesale pricing policy should be established.
 Everyday low price (EDLP) strategy should be developed by
using Activity based Costing (ABC).
 Eliminate gaming in shortage situations:

 In the time of shortage, products allocating can be done in

proportion to past sales records.
 Adjust production capacity or scheduling with better
knowledge of products demand.
 Eliminate bottlenecks:

 Delays in receiving orders should be controlled.

 Backup supplies of key products can mitigate problems
resulting from obstructed supply lines.
 Overview

 The bullwhip effect is a situation when demand

uncertainty and variability increase as one moves up a
supply chain in food industry. This effect can greatly
decrease the efficiency and profits.
 The challenges of the fresh food supply chain include:
1. Very short product shelf life,
2. The heterogeneous nature of the whole fresh food group.
3. The physical requirements for handling and storage
Fresh Food Supply Chain Characteristics

 Perishable products require a short supply

chain lead time allowance (SCLT)
 Short customer order lead times (COLT)
 SCLT and COLT then require high
responsiveness
 Demand uncertainty
 Information Sharing on Food Industry

 The availability of data is no longer a problem, but the

challenge still remains of how to best utilise the data to
improve the performance of the chain.
 Benefits of sharing information by Fliedner (2003) :
1. Benefit from increased sales.
2. Lower product inventories.
3. Higher service levels or order fill rates.
4. Improved forecast accuracy and
5. Lower system expenses
 Mitigation of BWE on Food Industry

 The sharing of order information should be very accurate.

 All the phases of SCM should have good co-operation.
 There should be no room for unavailability of demand or
sales data.
 The lead times need to be reduced as much as possible.
 The perishability is to be considered to select shipping
strategy.
 Thank you
FOR BEING WITH US……..