Bullwhip Effect Essay

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SCHOOL OF HUMAN RESOURCE DEVELOPMENT
MASTER OF BUSINESS ADMINISTRATION
COURSE TITLE: SUPPLY CHAIN STRATEGY
COURSE CODE: GCB 321F
NAME: Samuel wabwile
REGISTRATION NO: CDK-BHT/2009
ASSIGNMENT 1- THE BULLWHIP EFFECT

THE BULLWHIP EFFECT

The bullwhip effect occurs when the demand order variabilities in the supply chain are amplified as they
moved up the supply chain. Distorted information from one end of a supply chain to the other can lead to tremendous inefficiencies. Companies can effectively counteract the bullwhip effect by thoroughly
understanding its underlying causes. Industry leaders are implementing innovative strategies that pose
new challenges:
1. integrating new information systems
2. defining new organizational relationships, and
3. implementing new incentive and measurement systems.
Proctor and Gamble coined the term bullwhip effect which refers to the amplified demand pattern fluctuations that occur as we move from the consumer, to the retailer, to the wholesaler and up to the manufacturer of a product. The term was coined after documented study on Pampers which is a classic example of a product with very little consumer demand fluctuations. Proctor and Gamble observed that distributor orders to the factory varied far more than the preceding retail demand and their orders to their material suppliers fluctuated even more. Minor changes in demand at retail levels are reverberated up the supply chain in a daunting wave of demand shifts and thus causing havoc in the ideal supply chain system.
The bullwhip effect can therefore be described as a series of events that lead to supplier demand variability up the supply chain. Trigger events include the frequency of orders, varying quantities ordered, or the combination of both events by downstream partners in a supply chain. As the orders make their way upstream, the perceived demand is amplified and produces what is known as the bullwhip effect.
The bullwhip effect is exemplified in the...

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