Supply Chain Dynamics –
The Bull Whip Effect
crafting innovation together
© Crafitti Consulting Private Ltd. July 31, 2009 1

Key issues in the supply chain
Customer
Retailer
Wholesaler
crafting innovation together
Distributor
Factory
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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

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!
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Customer demand changes
Changes in customer
demand
Customer
Retailer
Wholesaler
crafting innovation together
Distributor
Factory
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Customer demand changes - induced
Customer
Retailer
Wholesaler
crafting innovation together
Distributor
Factory
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Batch Processing
Customer
Retailer
Wholesaler
crafting innovation together
Distributor
Factory
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Rationing Behavior
Customer
Retailer
Wholesaler
crafting innovation together
Distributor
Factory
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Incentive obstacles
Customer
Retailer
Wholesaler
crafting innovation together
Distributor
Factory
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Information distortion
Customer
Retailer
Wholesaler
crafting innovation together
Distributor
Factory
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Delays and lead times
Customer
Retailer
Wholesaler
crafting innovation together
Distributor
D
Factory
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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.)
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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