Bullwhip Effect, E-Commerce Video Lecture | E-Commerce - B Com

what is the bullwhip effect the bullwhip
effect is the unexpected distortion of
the supply chain caused by repetitive
variation in demand the unplanned a man
from retailer oscillates back to the
distributor and finally to the supply of
magnifying through each level of the
supply chain why is it called the
bullwhip effect as the oscillating
demand magnifies upstream in the supply
chain it is reminiscent of a cracking
whip why is this a problem while this
can have a negative effect on business
performance such as inventory
disruptions quality control problems
diminished customer service and
increased costs of material and manpower
welcome to Procter & Gamble manufacturer
of Pampers disposable diapers it doesn't
reduce you to the supply and demand
chain which is similar to most supply
and demand chains this is little Martin
our consumer the customer end he may
look cute and adorable now but wait
until you see they have our key is about
a cause or maybe we should say they have
our keys mommies of articles this is
your typical retail store all Mart one
of many which stocks in sells Pampers
diapers all what is having a sale this
weekend and running pampers as a loss
leader 50% off all the mummies are very
excited so they are planning to stock up
all mode orders in bulk from distributor
bees distributors taking all its safety
stock in the process the SS no stock
left to supply all Mart or any other
retailer for that matter not knowing
what is going on and we all this baby
suddenly came from this place is a big
order to replenish its inventory with
the factory Procter & Gamble's Factory
gets the big order and starts
manufacturing in overdrive but first it
has to negotiate with the Union
regarding overtime pay and get a lot
more supplies from its suppliers to get
the production on track for the neat
influx of babies the supplier is not
prepared for this sudden large order and
have insufficient raw material required
to make the darkness because the does
not have enough stuck the supplier
causes additional delays in production
meanwhile all one place is another order
that is bigger than normal because it
had great sales is
and most stock lifts but the distributor
is panicking because they have no stock
lifts and the factory has not seen
nearly enough to cover the orders so the
distributor places yet another big order
and so it continues because no one is
getting their orders they carry on
placing bigger orders stall compounding
the problem the factory is taking strain
suppliers under pressure distributors
are panicking retailers are upset
because they didn't get their orders
mommies that could not get to the home
on sale are upset because they have to
buy Snuggies and ones that made it don't
know what the fuss is all about by the
time the factory starts delivering
everybody down stream starts canceling
their orders and the factory is left
with an oversupply of stock so why does
this matter well because of the stock
our baby has to waste snuggles which
give him a rash all mud loss sales and
consumers aren't happy because they did
not have stock BS distributors retail
customers are unhappy because it took so
long to supply them with stock and they
in turn are in the dog box with a
factory for canceling half their orders
the factory could additional costs to
get the orders out faster and the
suppliers include additional costs in
sourcing raw material for the factory
and now their orders have been cut in
half
so now that you know what the bullwhip
effect is you probably want to know what
causes it and how we can prevent it
there are numerous factors often in
combination which contribute to the boom
of the things we will consider for four
major causes price fluctuations and
sales promotions sales promotions and
price discounts resulting customers
buying in large quantities and stocking
up as a result the buying pattern does
not reflect the actual consumption order
batching companies place orders in
batches often to avoid the cost of
processing orders more frequently or to
avoid the high transportation costs for
less than truckload orders shortage
gaming if product demand exceeds supply
manufacturers ration products or
customers exaggerate their orders to
counteract the rationing eventually
orders will disappear and cancellations
will pour in making it impossible for
the manufacturer to determine the real
demand for its product demand
forecasting accuracies as each entity
along the chain places an order it
replenishes stuck and includes some
safety stock with long lead times they
may be
of safety stock which make the
fluctuation in demand more significant
countermeasures to fluctuating prices
fluctuating prices can be replaced with
everyday low prices countermeasures to
order vacuum more frequent ordering
results in smaller orders and smaller
variants countermeasures to shortage
gaming proportional rationing schemes
are countered by allocating units based
on past sales ignorance of supply chain
conditions can be addressed by sharing
capacity and supply information across
the entire supply chain countermeasures
to demand forecast inaccuracies lack of
demand visibility can be addressed by
providing access to point-of-sale data
single control of replenishment or
vendor management inventory can overcome
exaggerated demand forecasts long lead
times should be reduced as much as
possible with all this said it's
actually all about communication
communication communication