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Bullwhip Effect
Bullwhip Effect (or Whiplash effect):
Fluctuations in orders increase as they move up the supply chain from retailers to wholesalers to manufacturers to suppliers
Uncertain demand information within the supply chain where each stage has different demand estimates (addition of buffers) and results in loss of supply chain coordination Happens due to customer demand fluctuations and inaccurate forecasts
Example: Effect on Textile industry in 2004-2006
2007 Pearson Education 16-3
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The Effect of lack of coordination (Bullwhip effect) on supply chain performance continued
Labour cost for shipping and receiving increases Demand fluctuations lead to variation in labour requirements which increases labour cost Level of product availability decreases High demand variability makes product supply on time difficult and may result in stock outs Relationships across the supply chain worsens Poor performance at every stage impacts the interaction between stages negatively Profitability decreases Reduced supply chain profitability as its more expensive to provide a given level of product availability
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