CASE STUDY OF BULLWHIP EFFECT IN SUPPLY CHAINS

Supply chains are dynamic systems. Overall supply chain evaluation needs to include the Bullwhip Effect (or Whiplash Effect). The Bullwhip Effect shows how small changes at the demand end of a supply chain are progressively amplified for operations further back in the chain, resulting in increased cost and poorer service. It is understood that demand forecast variance contributes to that effect in the chain. With this understanding, the authors experimented with two cases: i) stable demand with a single 5 % change in demand, and ii) changing demand in periodic 10 % increases and later in the same decreases. Increasing variability of orders and inventories up the supply chain is evident. The effect indicates a lack of synchronization among supply chain members because of corrupt key information about actual demand. When we understand the nature of supply chain dynamics, there are several actions concerned with coordinating the activities of the operations in the chain, which is discussed in the last part of the paper. By combining the right planning concepts with new real-time capabilities, planners are able to make more accurate decisions with greater flexibility.