Bullwhip Effect Essay

729 Words3 Pages
BULLWHIP EFFECT: A. Introduction: In today’s competitive environment, companies are competing for delivering value to end customers. The dazzling pace of information technologies and the improvements made on infrastructure make companies specialize on particular processes. Thus supply chains become more and more sophisticated each day and it becomes impossible for a specific company to handle all the steps of supply chain by itself. Instead they cooperate with each other while competing. At this point the information flow between companies is interrupted. B. Bullwhip Effect: “The bullwhip effect is short-hand term for a dynamical phenomenon in supply chains. It refers to the tendency of the variability of order rates to increase as they pass through the echelons of a supply chain toward producers and raw material suppliers (Disney, & Lambrect, 2008). Bullwhip effect triggers several problems in supply chains such as inessential high cost increases, excess inventory levels and overload errors in production/distribution activities. 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 (Lee, Padmanabahn, & Whang, 1997). In the same article Lee, Padmanabahn and Whang listed the causes of Bullwhip Effect as demand forecasting, order batching, price fluctuation, rationing and shortage gaming. C. Bullwhip Effect for Hindustan Oil Company: I would like to briefly explain the Hindustan Oil Company’s example of N.Ravichandaran from his article of “Managing Bullwhip Effect: Two Case Studies”. Hindustan Oil Company is a company which is in the business of branded hair oils, edible oils, fabric care, skin care and processed foods. The company’s supply chain consisted of a
Open Document