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Bullwhip Effect

Lean supply chain management aims to eliminate waste from business processes. It can help reduce the bullwhip effect, where small fluctuations in demand at retail levels cause larger fluctuations upstream. Effective communication and collaboration between customers, suppliers and different levels of the supply chain can help provide accurate forecasts to prevent unnecessary inventory buildup due to demand fluctuations. Demand driven supply chain management is one of the most effective ways to reduce the bullwhip effect.

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Samra Yasin
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86 views

Bullwhip Effect

Lean supply chain management aims to eliminate waste from business processes. It can help reduce the bullwhip effect, where small fluctuations in demand at retail levels cause larger fluctuations upstream. Effective communication and collaboration between customers, suppliers and different levels of the supply chain can help provide accurate forecasts to prevent unnecessary inventory buildup due to demand fluctuations. Demand driven supply chain management is one of the most effective ways to reduce the bullwhip effect.

Uploaded by

Samra Yasin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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ROLE OF LEAN SUPPLY CHAIN

TO PREVENT BULLWHIP EFFECT

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 Lean supply chain management is about removing waste
or unwanted components from a process..

 Lean supply chain management is not exclusively for those


companies who manufacture products, but by businesses
who want to streamline their processes by eliminating waste
and non-value added activities. Companies have a number of
areas in their supply chain where waste can be identified as
time, costs, or inventory.

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 The bullwhip effect is a supply chain phenomenon
describing how small fluctuations in demand at the
retail level can cause progressively larger
fluctuations in demand at the wholesale, distributor,
manufacturer and raw material supplier levels.

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 In some industries, it is known as the
“whiplash” or the “whipsaw” effect.

An effective supply chain manager will want


to use strategies to reduce the bullwhip
effect to improve the overall efficiency of the
supply chain. Some proven strategies are

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 Another strategy to improve supply
chain effectively is through better collaboration
with customers and suppliers. When companies
work with customers to understand their plans and
forecasts, they can build promotions and
seasonality into the forecast and then provide more
insight to their suppliers to help prevent the buildup
of unnecessary inventory due to the bullwhip effect.

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Even if a company tries to become more
demand driven, it still need a forecast to plan
long lead time items or to cover demand
from new customers, new products or in-
house promotions.

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 Using technology to implement controls and
track every aspect of production, distribution
and sales can quickly identify supply chain
bloating before it becomes a problem.
 This requires an effective communications
system between management in every
aspect of the chain. The ability to
communicate opens the door to quick
corrects and a more effective process.
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Demand driven supply chain management is one of
the most effective ways to reduce the bullwhip effect.
 It is a known fact that most forecasts are inaccurate,
so when actual demand materializes it is almost
certain to differ from forecast quantities.
 This causes companies to place emergency orders on
suppliers. Without effective communication, those
suppliers’ supply chain management systems will
overreact, setting off a chain reaction of excess
inventory that increases cost and slows velocity. In
contrast, a demand driven supply network will have
less overall inventory and be more responsive.
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Safety stock is simply extra inventory beyond
expected demand.
Entrepreneurs and Operations Managers carry
safety stock to prevent stock outs, caused by:

 Changes in customer demand


 Incorrect forecast
 Variability in lead times for raw materials

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 Bhattacharya, R., & Bandyopadhyay, S.
(2011). A review of the causes of bullwhip
effect in a supply chain.The International
Journal of Advanced Manufacturing
Technology, 54 (9-12), 1245-1261.
 http://theleansupplychain.com/wp-
content/uploads/2015/05/The-Bullwhip-
Affect.jpg

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 Emiliani, Bob; Stec, David; Grasso, Lawrence; Stodder,
James (2007). Better thinking, better results: case study
and analysis of an enterprise-wide lean
transformation (2nd ed.). Kensington, Conn: Center for
Lean Business Management. ISBN 978-0-9722591-2-5.

 https://www.google.com/search?biw=1366&bih=657&t
bm=isch&sa=1&ei=CiWVXM2gF_2GjLsPkI6j-
Ag&q=bullwhip+effect&oq=bullwhip+eff&gs_l=img.1.0.
35i39j0l9.21124.22466..23773...0.0..0.245.943.2-
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img.......0i67.9vJyLtVgGm0#imgrc=42ZqdUeipOZrVM:
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