Bullwhip effect of Marketing

1. Bullwhip Effect
in Supply Chain
With Example

2. Farmer
Supplier
Manufacturer
Whole Seller
Retailer
Consumer
Supply Chain

3. Bullwhips
• Bullwhips are tools, traditionally used to control livestock in open
country

4. Bullwhip effect
• Small fluctuation at one end can lead to large fluctuation at the other
end

5. Bullwhip effect in Supply Chain
• How small fluctuations in demand at the retail level can cause
progressively larger fluctuations in demand at the wholesale,
distributor, manufacturer and raw material supplier levels.

6. Bullwhip effect
• The bullwhip effect is a supply chain phenomenon describing how small
fluctuations in demand at the retail level can cause progressively larger
fluctuations in demand at the wholesale, distributor, manufacturer and
raw material supplier levels.
• The effect is named after the physics involved in cracking a whip.
• When the person holding the whip snaps their wrist, the relatively small
movement causes the whip's wave patterns to increasingly amplify in a
chain reaction.
.

7. Bullwhip effect
• In supply chain management, customers, suppliers, manufacturers and
salespeople all have only partial understanding of demand and direct
control over only part of the supply chain, but each influences the entire
chain with their forecasting inaccuracies (ordering too much or too little).
• A change in any link along the supply chain can have a profound effect on
the rest of the supply chain.
.

8. Example
1. Suppose, for example, a retailer typically sells 20 packs a day.
2. But one day, the retailer sells 70 packs and assumes customers will start
buying more product, and responds by ordering 100 packs to meet this
higher forecasted demand.
3. The distributor may then respond by ordering double, or 200 packs, from
the manufacturer to ensure they do not run out.
4. The manufacturer then produces 250 packs to be on the safe side.
In the end, the increased demand has been amplified up the supply chain
from to 70 packs at the customer level to 250 at the manufacturer.

9. Farmer
+20 order
Supplier
+12 order
Manufacturer
+ 7 order
Whole
Seller
+3 order
Retailer
+2 order
Consumer
+1 order