Bullwhip

Introduction

In this essay our group will discuss the simulation of the beer game conducted during lecture and relate it to the Bullwhip Effect. It will also define what bullwhip is, a literature review and the methods in which to reduce the bullwhip effect. We will then discuss our group’s performance from the simulation conducted in class.

Beer Game

The beer game was a role- play simulation game where students were the retailers, distributor, manufacturer and wholesalers, which lets students experience the problems of supply chain management.The big emphasis in this game is that information sharing and collaboration does not exist. The main learning from this game is this supply chain represents a non coordinated system in which problems arise due to the lack of systemic thinking.

Definition

The bullwhip effect can be defined as “an occurrence detected by the supply chain where orders sent to the manufacturer and supplier create larger variance than the sales to the end customer” (Lee, Padmanabhan & Whang, 1997). The bullwhip effect occurs when the demand order is irregular in the supply chain, these irregularities are amplified as they moved up the supply chain. This amplification in the fluctuation of orders can interrupt the smoothness of the supply chain process and can produce undesirable consequences such as inefficiency and waste. This is a result of over or underestimation of demand as the orders move upwards between different organisations in the supply chain (as cited in Bhattacharya & Bandyopadhyay, 2011, p. 1245). some main causes of the bullwhip effect are lack of communication, distorted information and order batching. A formula for the size of bullwhip is

Bullwhip = (Variance of order size) / (Variance of demand order size)

Therefore a bullwhip equal to one implies no bullwhip is occurring. Over one implies an amplification of the bullwhip effect and under one implies a dampening effect of the demand

Causes of Bullwhip...