Bull Whip Effect demistified


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First round entry for the Beer game simulation for event held at Drishti, SIOM (B'School Fest). Team Active Y came first in second round.

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Bull Whip Effect demistified

  1. 1. SIOM Simulacrum Simulacrum Team- ActiveY NITIE, Mumbai Sandeep Singh Bedi, bedisandeep@gmail.com, 9702970021 Pradeep Chhabria, p.chhabria.lnmiit@gmail.com, 9702968768 Rakesh Sahu, rksahu.83@gmail.com, 9757308086 Shanu Singh, shanuchaudhery@gmail.com, 9702018520
  2. 2. SIOM SimulacrumQuestion 1: What is Bullwhip Effect and how does it relate to lack of coordination in a supplychain?Bullwhip Effect is the phenomenon where a retailer’s orders to their suppliers tend to have a largervariance than the consumer demand that triggered the orders. This demand distortion propagatesupstream with amplification occurring at each echelon. Three major causes of the Bullwhip Effect: 1. Lead time of information sharing and material 2. Order batching & forecasting error 3. Supply shortages, which also lead to artificial demands.Oscillating demand magnification upstream in supply chain is shown below:
  3. 3. SIOM SimulacrumLack of Coordination of information across different tiers leads to ripple effect as shown above. It canbe dealth with real-time information sharing system hence reducing the lead time, controlling theinventory and finally improving the service level.
  4. 4. SIOM SimulacrumQuestion 2: What problems result if each stage of a supply chain views its demand as the ordersplaced by the downstream stage? How should firms within a supply chain communicate tofacilitate coordination?If demand is taken as the order placed, then downstream stage had to rely on the sales orders fromstage above to product forecasts, plan capacity, control inventory, and schedule production. Bigvariations in demand will be a major problem, leads to bullw bullwhip’s effect.The common inefficiencies in this supply chain are mentioned in below figure.
  5. 5. SIOM SimulacrumApproaches to provide Better Communication within Supply ChainData requirements for supply chain modeling
  6. 6. SIOM Simulacrum
  7. 7. SIOM SimulacrumQuestion 3: How is the building of strategic partnerships and trust valuable within a supplychain?Successful supply chain performance is based on a high level of trust and robust partnershipstrategies.Strategic Partnership aims for synergy among partners based on trust with a belief that benefitsfrom alliance would be more productive than an individual unit.It provides: • Reduced conflict between partners. • On-time delivery • Greater consistency in parts, supplies, semi-assembled, and completed products • Effective information sharing among partners resulting in better knowledge for accurate forecastsCharacteristics
  8. 8. SIOM SimulacrumTrust among partners is an essential requirement for a successful Supply Chain.Firms within a supply chain environment need to share resources and information with partners bybuilding trust for a successful Supply Chain.
  9. 9. SIOM SimulacrumQuestion 4: What are the different CPFR scenarios and how do they benefit the supply chainpartners?Collaborative Planning, Forecasting, and Replenishment is a business process model whereby supplychain trading partners can jointly plan key supply chain acidities from production and delivery of rawmaterials to production and delivery of final products to end customers. The latest version of theCPFR guidelines is an interactive cycle of four main activities, so called Collaboration Activities asshown in below diagram.
  10. 10. SIOM SimulacrumThe CPFR reference model is designed to fit many scenarios. Any individual CPFR program must adaptthe model to the particular needs of the trading relationshipWe can select multiple scenarios from above table according to adaptability and industry.
  11. 11. SIOM SimulacrumReferences 1. How human behaviour amplifies the bullwhip effect , Joerg Nienhaus, Arne Ziegenbein , Christoph Duijts, Centre for Enterprise Sciences (BWI), Swiss Federal Institute of Technology (ETH) Zurich, Zuerichbergstrasse 18, 8028 Zurich, Switzerland 2. The Bullwhip Effect In Supply Chains, Hau L Lee, V Padmanabhan, and Seungjin Whang; Sloan Management Review, Spring 1997, Volume 38, Issue 3, pp. 93-102 3. Challenging the bullwhip effect with advanced information sharing By R. Douglas Derrick 4. Reducing the impact of demand process variability within a multi-echelon supply chain, Francisco Campuzano Bolarín ,Lorenzo Ros Mcdonnell, Juan Martín García, Department of Business Economy . Technical University of Cartagena. Campus Muralla del Mar s/n, 30201. Cartagena (Spain). 5. Managing Supply Chain Demand Variability with Scheduled Ordering Policies Ge ´rard P. Cachon Duke University, Fuqua School of Business, Durham, North Carolina 27708, www.duke.edu/ ˜gpc 6. CPFR Overview Handbook, Voluntary Inter industry Commerce Standards (VICS), FIVE ESSENTIAL ELEMENTS OF INTEGRATED SUPPLY CHAIN MANAGEMENT, AQUA MANAGEMENT CONSULTING GROUP 7. A Guide to CPFR Implementation, Accenture 8. A white paper by J D Edwards on CPFR — COLLABORATIVE PLANNING, FORECASTING AND REPLENISHMENT 9. Collaborative Planning, Forecasting and Replenishment (CPFR®, VICS, 2004.