Bullwhipeffect

List the causes for the bullwhip effect – how they were

specifically manifested in your group

The bullwhip effect can be perceived through oscillating demand, and the time difference between the order placed and the arrival of the order. The inventory level will not be stable, if there is no exact communication amongst the tiers of the supply chain.

The general causes of the bullwhip effect are:

• Safety stock and maximum order stock levels are not kept. Our team did not set a safety stock level, because we tried to implement JIT. Neither did we set a maximum stock level, nevertheless, we tried to keep stock levels below a maximum of 200,000, even if at one point the factory had 500,000 units of inventory.

• After unmet demand there is panic ordering. Being in backlog is more costly than having inventory. Thus backlog puts the players under pressure, and hasty ordering is made, mostly leading to an increase in inventory and a high amount of orders, resulting in the bullwhip effect.

• A lack of controlling and S&OP within the ordering policy. At the beginning we had prepared an Excel file, which allowed us to input the customer demand and then tell us how much we should order to keep the inventory level constant. Due to time constraints we could not proceed with the usage of this file, nevertheless, I believe we did a good job.

• Customer demand forecasting errors. Taking the data from the former Beer Game, we could estimate that customer demand would fluctuate between 100,000 and max 200,000. Thus we could estimate how much inventory we should keep on average. Nevertheless, when moving down the supply chain, there where some fluctuation. The factory only had 2 weeks of lead-time, hence inventory was replenished faster than the other players. This led to inefficient in ordering-cycles, because various players would sometimes order zero quantities. In real life this is not very efficient for the supplier, because he would not have any throughput that...