Supply Chain Dynamics – The Bull Whip Effect

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Supply chains invariably demonstrate a demand-supply variability called the bull-whip effect - the effect increases in magnitude as we move farther away from the customer in the supply chain. Some of the causes and implications of the bull whip effect are discussed here.

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Supply Chain Dynamics – The Bull Whip Effect

  1. 1. Supply Chain Dynamics – The Bull Whip Effect crafting innovation together © Crafitti Consulting Private Ltd. July 31, 2009 1
  2. 2. Key issues in the supply chain Customer Retailer Wholesaler crafting innovation together Distributor Factory © Crafitti Consulting Private Ltd. July 31, 2009 2
  3. 3. Lead times - Inventory If your nearest department store is 20 km away, you cannot go there everyday. Have to stock your weekly supplies! crafting innovation together Lead times lead to inventory © Crafitti Consulting Private Ltd. July 31, 2009 3
  4. 4. Lead Times – Loss of Flexibility Mid week if you get a sudden unanticipated pang for chocolate Well, you just have to wait till you finish what’s crafting innovation together already there! © Crafitti Consulting Private Ltd. July 31, 2009 4
  5. 5. Customer demand changes Changes in customer demand Customer Retailer Wholesaler crafting innovation together Distributor Factory © Crafitti Consulting Private Ltd. July 31, 2009 5
  6. 6. Customer demand changes - induced Customer Retailer Wholesaler crafting innovation together Distributor Factory © Crafitti Consulting Private Ltd. July 31, 2009 6
  7. 7. Batch Processing Customer Retailer Wholesaler crafting innovation together Distributor Factory © Crafitti Consulting Private Ltd. July 31, 2009 7
  8. 8. Rationing Behavior Customer Retailer Wholesaler crafting innovation together Distributor Factory © Crafitti Consulting Private Ltd. July 31, 2009 8
  9. 9. Incentive obstacles Customer Retailer Wholesaler crafting innovation together Distributor Factory © Crafitti Consulting Private Ltd. July 31, 2009 9
  10. 10. Information distortion Customer Retailer Wholesaler crafting innovation together Distributor Factory © Crafitti Consulting Private Ltd. July 31, 2009 10
  11. 11. Delays and lead times Customer Retailer Wholesaler crafting innovation together Distributor D Factory © Crafitti Consulting Private Ltd. July 31, 2009 11
  12. 12. Real Supply chains are much more complex! crafting innovation together • Each player has a network of partners • Each player may perform more than one role • Relationships are multi-faceted and dynamic (pricing strategies, procurement strategies etc.) © Crafitti Consulting Private Ltd. July 31, 2009 12
  13. 13. Innovating complex real-life Supply Chain Networks requires a Lean Inventive Systems Thinking Approach! Inventive Thinking (inventive triggers, laws of evolution, scenario building, focus on function) Systems Thinking Lean Thinking (holistic approach, (Value maximization, global optima, experimentation, expanded and learning approach, crafting innovation together connected system elegance) context) LIST (Lean Inventive Systems Thinking) © Crafitti Consulting Private Ltd. July 31, 2009 13

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