Factors Affecting Purchasing Effectiveness in the Public Sugar Sector:A Case ...paperpublications3
Abstract:In the recent past, procurement performance has been attracting great attention from practitioners, academicians and researchers due to poor performance resulting from non adherence to proper processes and procedures. Many of the studies have devoted their content to financial factors as measures of effectiveness dismally giving consideration to non financial factors. This study aimed at investigating selected non financial factors that influence the effectiveness of purchasing function in the public sugar sector guided by four specific objectives; to find out how purchasing interaction with other departments impacts on its effectiveness, to find out how Purchasing delegated authority impacts on its effectiveness, to find out how Purchasing activity Execution impacts on its effectiveness and to find out how supplier relationship management practices impacts on purchasing function effectiveness. The four variables were found to have an effect on effectiveness of purchasing function in the public sugar sector. The study adopted a descriptive case research design and the study population comprised of 118 management staff Nzoia Sugar Company Ltd. A purposive sampling technique was employed to select a sample size of 57 respondents. Questionnaires were used as the main data collection instruments. Descriptive statistics data analysis method was applied to analyze numerical data gathered using closed ended questions aided by Statistical Package for Social Sciences (SPSS). From the findings, level of task execution explained 43.1% of purchasing department’s effectiveness, level of supplier relationship explained 20.9% and interaction level explained 2.2% while the level of purchasing delegated authority had a negative relationship with its effectiveness at -4.1% which means that the more autonomous purchasing department becomes the less effective it will be. The study recommends application of supplier collaboration strategies, integration of supply chain management tasks with IT to help speed up decision making process between the SCM partners, signing service level agreements (SLA),purchasing function to increase effectiveness by training and being members of professional bodies such as CIPS and KISM.
Keywords:Assessment, delegated authority, effectiveness, efficiency, inventory, non financial measures, purchasing interaction.
Summary of and Commentary on the 2021 DemandGen B2B Buyers Survey Report Tim Steele
The survey highlights much of what we knew, with new insights about purchasing circumstances post-COVID, elements of the purchasing process, and purchasing teams.
Factors Affecting Purchasing Effectiveness in the Public Sugar Sector:A Case ...paperpublications3
Abstract:In the recent past, procurement performance has been attracting great attention from practitioners, academicians and researchers due to poor performance resulting from non adherence to proper processes and procedures. Many of the studies have devoted their content to financial factors as measures of effectiveness dismally giving consideration to non financial factors. This study aimed at investigating selected non financial factors that influence the effectiveness of purchasing function in the public sugar sector guided by four specific objectives; to find out how purchasing interaction with other departments impacts on its effectiveness, to find out how Purchasing delegated authority impacts on its effectiveness, to find out how Purchasing activity Execution impacts on its effectiveness and to find out how supplier relationship management practices impacts on purchasing function effectiveness. The four variables were found to have an effect on effectiveness of purchasing function in the public sugar sector. The study adopted a descriptive case research design and the study population comprised of 118 management staff Nzoia Sugar Company Ltd. A purposive sampling technique was employed to select a sample size of 57 respondents. Questionnaires were used as the main data collection instruments. Descriptive statistics data analysis method was applied to analyze numerical data gathered using closed ended questions aided by Statistical Package for Social Sciences (SPSS). From the findings, level of task execution explained 43.1% of purchasing department’s effectiveness, level of supplier relationship explained 20.9% and interaction level explained 2.2% while the level of purchasing delegated authority had a negative relationship with its effectiveness at -4.1% which means that the more autonomous purchasing department becomes the less effective it will be. The study recommends application of supplier collaboration strategies, integration of supply chain management tasks with IT to help speed up decision making process between the SCM partners, signing service level agreements (SLA),purchasing function to increase effectiveness by training and being members of professional bodies such as CIPS and KISM.
Keywords:Assessment, delegated authority, effectiveness, efficiency, inventory, non financial measures, purchasing interaction.
Summary of and Commentary on the 2021 DemandGen B2B Buyers Survey Report Tim Steele
The survey highlights much of what we knew, with new insights about purchasing circumstances post-COVID, elements of the purchasing process, and purchasing teams.
2014 Customer Loyalty ASEAN Conference: Prof de los ReyesJim D Griffin
Prof. Francisco de los Reyes (Prof. Kikko) discusses the art and science of segmentation, using a case-study approach. He presents a practical 8-step framework that loyalty marketers can use to improve engagement and sales. Prof. Kikko is a consultant for measurement science at Nielsen Media Research, SAS and McCann Worldgroup, among others, including a wide variety of marketing initiatives at top companies in the banking sector, FMCG and other verticals. He leads the statistical practice for Lassu (lassuloyalty.com)
Price dominates shoppers' buying decisions - making it critical for retailers to get prices right from the start. Today, pricing has moved from an art to a science - compelling retailers to manage it as a dedicated, technology-driven area of their business.
It is a case study related to Market Research and marketing. this contains the 7 aspects of Case Study like situational analysis, identification of problem, facts and findings, assumption, SWOT analysis, generation of alternative, evaluation of alternatives and select the best.
The Art and Science of Sales Forecasting: A Webinar for Sales Managers and Co...Birst
Overview
Sales forecasting is a science and an art. It is the combination of information and metrics, intuition and best practices. However, sales forecasting is most commonly associated to the standard grading methodology of the particular customer relationship system that is being used (Salesforce.com, Oracle, Microsoft, etc.). In reality, how do key sales leaders become high performing accurate sales forecasters? In addition, how do companies effectively utilize sales forecasting information to increase overall organizational performance?
Here’s what we’ll discuss in this session:
State-of-the-art forecasting strategies, best practices, and key metrics
The interconnection between product complexity, company lifecycle stage, and accurate forecasting
Mitigating downside risk and triangulation strategies to determine the truth
Deal inspection and vetting sales rep forecasts
The different types of sales forecasters; exaggerators, sandbaggers, and Heavy Hitters
The difference between snapshot, intra-department, and inter-department sales forecasting
Predictive Analytics in Retail - Visual Infographic Reportc24ltd
A visual infographic report about Predictive Analytics in Retail, based on our whitepaper "Predictive Analytics in Retail" (link: https://blog.c24.co.uk/2016/08/17/c24-publishes-new-predictive-analytics-whitepaper/).
We explore the ways in which Predictive Analytics is set to change how retailers make use of big data, analytics and insights across their customers, supply chain and stores.
SAP WHITEPAPER: Reacting in the Retail Moment, Analyzing Big Data in Real Tim...Beyond Technologies
Under any circumstances, retail is an extremely competitive industry. But today, an uncertain economy and low consumer confidence, coupled with shorter product lifecycles and well-informed, demanding customers, make it especially difficult to execute a profitable strategy.
Retailers have only a narrow window to make the sale and seize the opportunity. Thriving in this environment means maximizing the profit potential of each interaction, transaction, and customer contact.
Price Advantage has written by Baker, Marn, Zawada. This is a book summary presentation which focused on basic concepts and new product pricing methods.
the presentation is about managing coordination between the supply chains for fast movement of resources.factors affecting the coordiantion in supply chain.
2014 Customer Loyalty ASEAN Conference: Prof de los ReyesJim D Griffin
Prof. Francisco de los Reyes (Prof. Kikko) discusses the art and science of segmentation, using a case-study approach. He presents a practical 8-step framework that loyalty marketers can use to improve engagement and sales. Prof. Kikko is a consultant for measurement science at Nielsen Media Research, SAS and McCann Worldgroup, among others, including a wide variety of marketing initiatives at top companies in the banking sector, FMCG and other verticals. He leads the statistical practice for Lassu (lassuloyalty.com)
Price dominates shoppers' buying decisions - making it critical for retailers to get prices right from the start. Today, pricing has moved from an art to a science - compelling retailers to manage it as a dedicated, technology-driven area of their business.
It is a case study related to Market Research and marketing. this contains the 7 aspects of Case Study like situational analysis, identification of problem, facts and findings, assumption, SWOT analysis, generation of alternative, evaluation of alternatives and select the best.
The Art and Science of Sales Forecasting: A Webinar for Sales Managers and Co...Birst
Overview
Sales forecasting is a science and an art. It is the combination of information and metrics, intuition and best practices. However, sales forecasting is most commonly associated to the standard grading methodology of the particular customer relationship system that is being used (Salesforce.com, Oracle, Microsoft, etc.). In reality, how do key sales leaders become high performing accurate sales forecasters? In addition, how do companies effectively utilize sales forecasting information to increase overall organizational performance?
Here’s what we’ll discuss in this session:
State-of-the-art forecasting strategies, best practices, and key metrics
The interconnection between product complexity, company lifecycle stage, and accurate forecasting
Mitigating downside risk and triangulation strategies to determine the truth
Deal inspection and vetting sales rep forecasts
The different types of sales forecasters; exaggerators, sandbaggers, and Heavy Hitters
The difference between snapshot, intra-department, and inter-department sales forecasting
Predictive Analytics in Retail - Visual Infographic Reportc24ltd
A visual infographic report about Predictive Analytics in Retail, based on our whitepaper "Predictive Analytics in Retail" (link: https://blog.c24.co.uk/2016/08/17/c24-publishes-new-predictive-analytics-whitepaper/).
We explore the ways in which Predictive Analytics is set to change how retailers make use of big data, analytics and insights across their customers, supply chain and stores.
SAP WHITEPAPER: Reacting in the Retail Moment, Analyzing Big Data in Real Tim...Beyond Technologies
Under any circumstances, retail is an extremely competitive industry. But today, an uncertain economy and low consumer confidence, coupled with shorter product lifecycles and well-informed, demanding customers, make it especially difficult to execute a profitable strategy.
Retailers have only a narrow window to make the sale and seize the opportunity. Thriving in this environment means maximizing the profit potential of each interaction, transaction, and customer contact.
Price Advantage has written by Baker, Marn, Zawada. This is a book summary presentation which focused on basic concepts and new product pricing methods.
the presentation is about managing coordination between the supply chains for fast movement of resources.factors affecting the coordiantion in supply chain.
Predictive Response to Combat Retail ShrinkCognizant
By combining the statistical and mathematical rigor of advanced analytics with established business acumen and domain experience, retailers can ferret out and reduce shrinkage caused by fraud, non-compliance, poor processes and organized crime.
S P R I N G 1 9 9 7Hau L. LeeV. PadmanabhanSeungjin W.docxrtodd599
S P R I N G 1 9 9 7
Hau L. Lee
V. Padmanabhan
Seungjin Whang
The Bullwhip
Effect in Supply
Chains
Distorted information from one end of a supply chain to the
other can lead to tremendous inefficiencies: excessive
inventory investment, poor customer service, lost revenues,
misguided capacity plans, ineffective transportation, and
missed production schedules. How do exaggerated order
swings occur? What can companies do to mitigate them?
Vol. 38, No. 3 Reprint #3837 http://mitsmr.com/1phEOiM
http://mitsmr.com/1phEOiM
93SLOAN MANAGEMENT REVIEW/SPRING 1997 LEE ET AL.
N
ot long ago, logistics executives at Procter &
Gamble (P&G) examined the order pat-
terns for one of their best-selling products,
Pampers. Its sales at retail stores were fluctuating, but
the variabilities were certainly not excessive. However,
as they examined the distributors’ orders, the execu-
tives were surprised by the degree of variability. When
they looked at P&G’s orders of materials to their sup-
pliers, such as 3M, they discovered that the swings
were even greater. At first glance, the variabilities did
not make sense. While the consumers, in this case,
the babies, consumed diapers at a steady rate, the de-
mand order variabilities in the supply chain were am-
plified as they moved up the supply chain. P&G
called this phenomenon the “bullwhip” effect. (In
some industries, it is known as the “whiplash” or the
“whipsaw” effect.)
When Hewlett-Packard (HP) executives examined
the sales of one of its printers at a major reseller, they
found that there were, as expected, some fluctuations
over time. However, when they examined the orders
from the reseller, they observed much bigger swings.
Also, to their surprise, they discovered that the orders
from the printer division to the company’s integrated
circuit division had even greater fluctuations.
What happens when a supply chain is plagued with
a bullwhip effect that distorts its demand information
as it is transmitted up the chain? In the past, without
being able to see the sales of its products at the distri-
bution channel stage, HP had to rely on the sales or-
ders from the resellers to make product forecasts, plan
capacity, control inventory, and schedule production.
Big variations in demand were a major problem for
HP’s management. The common symptoms of such
variations could be excessive inventory, poor product
forecasts, insufficient or excessive capacities, poor cus-
tomer service due to unavailable products or long back-
logs, uncertain production planning (i.e., excessive revi-
sions), and high costs for corrections, such as for expe-
dited shipments and overtime. HP’s product division
was a victim of order swings that were exaggerated by
the resellers relative to their sales; it, in turn, created
additional exaggerations of order swings to suppliers.
In the past few years, the Efficient Consumer Re-
sponse (ECR) initiative has tried to redefine how the
grocery supply chain should work.1 One motivation
fo.
Driving a Customer-Centric Supply Chain - 7 NOV 2016Lora Cecere
Report Details: The research for this report was conducted via an online survey from August 12 - October 14, 2016. Surveys were conducted among Manufacturers, Wholesalers/Distributors/Co-operatives and Third-Party Logistics Providers (n=56).
Objective: To determine how companies build a customer-centric supply chain and how well it is working for them.
Highlight: In this study, 80% of companies have a customer-centric strategy; yet the majority (54%) state that there is room for improvement to drive performance changes in their supply chain. Companies struggle to drive alignment and build constancy of purpose.
After viewing this project one can understand how a FMCG company operates its finances. The ratio analysis of the firm showing how to calculate the profitability, sustainability, viability of a firm to operate its day to day business in a profitable zone.
This Research deals with the supply chain
management (SCM) provide us a high practical rapidity flow of
high quality, significant information that will assist suppliers to
provide a constant and specifically timed flow of resources to
customers. However, unplanned demand oscillations, including
those caused by stock outs, in the supply chain performance
development produce distortions. There are numerous causes,
often in combination that will cause these supply chain
distortions to start what has become known as the “Bullwhip
Effect”.
While the devil is generally hidden in the details, as is the
case here, the most common drivers of these demand distortions
are: Customers, Promotions, Sales, Manufacturing Policies,
Processes, Systems and Suppliers. The “Bullwhip Effect” has in
the past been recognized as normal, and in fact, thought to be a
predictable part of the order-to-delivery cycle. In this paper we
propose a novel effective approach to find the MSE (Mean square
error) with the help of MAMDANI Fuzzy logic.
Using Adaptive Scrum to Tame Process Reverse Engineering in Data Analytics Pr...Cognizant
Organizations rely on analytics to make intelligent decisions and improve business performance, which sometimes requires reproducing business processes from a legacy application to a digital-native state to reduce the functional, technical and operational debts. Adaptive Scrum can reduce the complexity of the reproduction process iteratively as well as provide transparency in data analytics porojects.
It Takes an Ecosystem: How Technology Companies Deliver Exceptional ExperiencesCognizant
Experience is evolving into a strategy that reaches across technology companies. We offer guidance on the rise of experience and its role in business modernization, with details on how orgnizations can build the ecosystem to support it.
The Work Ahead: Transportation and Logistics Delivering on the Digital-Physic...Cognizant
The T&L industry appears poised to accelerate its long-overdue modernization drive, as the pandemic spurs an increased need for agility and resilience, according to our study.
Enhancing Desirability: Five Considerations for Winning Digital InitiativesCognizant
To be a modern digital business in the post-COVID era, organizations must be fanatical about the experiences they deliver to an increasingly savvy and expectant user community. Getting there requires a mastery of human-design thinking, compelling user interface and interaction design, and a focus on functional and nonfunctional capabilities that drive business differentiation and results.
The Work Ahead in Manufacturing: Fulfilling the Agility MandateCognizant
According to our research, manufacturers are well ahead of other industries in their IoT deployments but need to marshal the investment required to meet today’s intensified demands for business resilience.
The Work Ahead in Higher Education: Repaving the Road for the Employees of To...Cognizant
Higher-ed institutions expect pandemic-driven disruption to continue, especially as hyperconnectivity, analytics and AI drive personalized education models over the lifetime of the learner, according to our recent research.
Engineering the Next-Gen Digital Claims Organisation for Australian General I...Cognizant
In recent years, insurers have invested in technology platforms and process improvements to improve
claims outcomes. Leaders will build on this foundation across the claims landscape, spanning experience,
operations, customer service and the overall supply chain with market-differentiating capabilities to
achieve sustainable results.
Profitability in the Direct-to-Consumer Marketplace: A Playbook for Media and...Cognizant
Amid constant change, industry leaders need an upgraded IT infrastructure capable of adapting to audience expectations while proactively anticipating ever-evolving business requirements.
Green Rush: The Economic Imperative for SustainabilityCognizant
Green business is good business, according to our recent research, whether for companies monetizing tech tools used for sustainability or for those that see the impact of these initiatives on business goals.
Policy Administration Modernization: Four Paths for InsurersCognizant
The pivot to digital is fraught with numerous obstacles but with proper planning and execution, legacy carriers can update their core systems and keep pace with the competition, while proactively addressing customer needs.
The Work Ahead in Utilities: Powering a Sustainable Future with DigitalCognizant
Utilities are starting to adopt digital technologies to eliminate slow processes, elevate customer experience and boost sustainability, according to our recent study.
AI in Media & Entertainment: Starting the Journey to ValueCognizant
Up to now, the global media & entertainment industry (M&E) has been lagging most other sectors in its adoption of artificial intelligence (AI). But our research shows that M&E companies are set to close the gap over the coming three years, as they ramp up their investments in AI and reap rising returns. The first steps? Getting a firm grip on data – the foundation of any successful AI strategy – and balancing technology spend with investments in AI skills.
Operations Workforce Management: A Data-Informed, Digital-First ApproachCognizant
As #WorkFromAnywhere becomes the rule rather than the exception, organizations face an important question: How can they increase their digital quotient to engage and enable a remote operations workforce to work collaboratively to deliver onclient requirements and contractual commitments?
Five Priorities for Quality Engineering When Taking Banking to the CloudCognizant
As banks move to cloud-based banking platforms for lower costs and greater agility, they must seamlessly integrate technologies and workflows while ensuring security, performance and an enhanced user experience. Here are five ways cloud-focused quality assurance helps banks maximize the benefits.
Getting Ahead With AI: How APAC Companies Replicate Success by Remaining FocusedCognizant
Changing market dynamics are propelling Asia-Pacific businesses to take a highly disciplined and focused approach to ensuring that their AI initiatives rapidly scale and quickly generate heightened business impact.
The Work Ahead in Intelligent Automation: Coping with Complexity in a Post-Pa...Cognizant
Intelligent automation continues to be a top driver of the future of work, according to our recent study. To reap the full advantages, businesses need to move from isolated to widespread deployment.
The Work Ahead in Intelligent Automation: Coping with Complexity in a Post-Pa...
Reducing the Bullwhip Effect via Market Research-Gleaned Insights
1. Reducing the Bullwhip Effect via Market
Research-Gleaned Insights
Surveys, focus groups and interviews can identify the sources of costly
variations in demand signals up and down the supply chain.
Executive Summary
In an ideal world, supply chains would be in equi-
librium. At every link in the chain, each partici-
pant would be armed with accurate information
about demand and inventory, enabling them to
make rational choices and order only what they
needed at any time.
In the real world, however, buyers often have
outdated or inaccurate information about demand
trends. Caught between the twin threats of excess
inventory and empty shelves, they guess or
hedge their bets based on the supplier’s past per-
formance at meeting delivery promises. Fearful
of shortages, they intentionally over-order if free
returns make it easy for them to do so.
The resulting and increasingly inaccurate order
activity is called “the bullwhip effect” because
minor variations are amplified as they move up
the supply chain, costing material suppliers, man-
ufacturers, distributors and retailers an estimated
millions of dollars a year.
When manufacturers, distributors and retailers
over-order, they tie up excess capital in inventory,
and are forced to discard perishable raw materials
they don’t need or pay inflated prices for inventory
(and its shipping and storage) to meet demand
that doesn’t exist. If they under-order, they lose
sales when customers turn away from their bare
shelves to a competitor, or lose profit by paying
premium shipping and production rates to meet
demand.
Players throughout the supply chain use a variety
of methods to reduce the bullwhip effect, ranging
from new technology, to changes in the terms
and conditions they offer customers. However,
these fixes often do not work because they are
not aimed at the decision-makers whose actions
do the most harm.
Market research can help business leaders
understand the needs, desires, fears and assump-
tions of consumers at the end of the supply
chain, but it can also serve a higher purpose.
Market research can identify the stakeholders
who contribute the most to the bullwhip effect
and understand why they act as they do. These
insights can help companies create customized
solutions with a higher return on investment than
scattershot efforts to remediate the bullwhip
effect. By focusing on the most critical causes
of the bullwhip effect, organizations can save
time and money and reduce the most inefficient
behaviors most quickly.
• Cognizant 20-20 Insights
cognizant 20-20 insights | june 2014
2. 2cognizant 20-20 insights
How the Bullwhip Effect Distorts the Supply Chain
Retailer
15 units
Wholesaler
30 units
Manufacturer
50 units
70 units
Raw material supplier
Figure 1
Market Research at Work
While many factors contribute to the bullwhip
effect, all are initiated by humans.
By using analytics-driven market research, we
can understand why various supply chain players
act as they do. We can also test their reactions
to new policies, business practices and technolo-
gies to determine which are most cost-effective at
reducing the bullwhip effect.
The first step often involves primary market
research techniques such as conversations (focus
group interviews) and small-scale surveys to make
“informed guesses” about the roles of various
actors. These are generally followed by more
extensive surveys to validate these preliminary
conclusions among a larger group of stakehold-
ers. These follow-up surveys can also uncover
more detailed insights, such as exactly which deci-
sion-makers are most likely to misuse free return
policies, what level of discounts might reduce
order batching or which decision-makers (such as
senior executives) are most likely to get accurate
information about demand and inventories.
Here are five common causes of the bullwhip
effect, possible solutions to them, and examples
of how market research findings can help an orga-
nization understand the reasons for the distortion
and identify the best possible remedies.
Bullwhip Scenario #1: Individual fears
trump organizational efficiency
• Cause: If an organization has been hurt by
over- or under-ordering in the past, it is only
natural for a purchasing or procurement
manager (especially one who replaced an
unsuccessful predecessor) to overreact in the
other direction. While these actions protect the
decision-maker in the short term, they lead to
excess costs in the form of excess inventories
or stock-outs (see sidebar, next page).
>> Remediations: Deemphasize target-based
planning, or change those targets to reach
a better balance between the cost of excess
inventory vs. the cost of stock-outs. Edu-
cate decision-makers on the broader effects
of their decisions, and consider changes in
compensation or evaluation practices to re-
inforce more efficient choices.
>> How market research can help: Because
such intentional “fudging” of orders might
be embarrassing or even harmful to employ-
ees, their motivations might be best identi-
fied through focus groups or polls in which
responses are kept anonymous. Informal
primary market research (such as conversa-
tions or focus groups) with suppliers or for-
mer employees might uncover likely theories
to test in broader follow-up surveys. With this
3. 3cognizant 20-20 insights
information, organizations can identify spe-
cifically who within the supply chain inten-
tionally under- or over-orders and why. They
can also “test,” just as in product-oriented
market research, which combination of new
systems, incentives and messaging is most
likely to reduce their inefficient behavior.
Bullwhip Scenario #2: Lack of
adequate and timely information
about demand trends
• Cause: While a store manager may sense
a shift in fashion or demand long before a
district manager or supplier does, such infor-
mation is often not shared due to a lack of
proper systems, processes and/or corporate
culture. The older the information, the greater
the potential distortion as decisions based on it
ripple through the supply chain.
>> Remediations: Set production or inventory
targets based on activity that is closer to the
customer and thus more accurately reflects
markets trends.
Implement or upgrade ERP systems to make
it easier to share information and adjust com-
pensation to reward information-sharing.
>> How market research can help: Primary
research (informal interviews) can probe
for “horror stories” or anecdotes that might
hint at more systemic problems. Surveys can
ask decision-makers at each link in the sup-
ply chain how well their demand is met by
those further down the chain. Such surveys
can provide more granular insights through
detailed questions about the size, composi-
tion, timeliness and quality of the goods or
raw materials received at each link in the
Quick Take
A short market research study can help organiza-
tions focus their efforts on reducing the bullwhip
effect. Among the questions that could be asked
in a qualitative review are:
• What are the various factors (e.g., previous
month’s sales, increased sales of competitors’
products, etc.) that customers consider when
ordering a product? Which of these factors
was most important, and why? What circum-
stances make one of these factors more or less
important in setting order levels?
• For how long does the customer prefer to
accumulate demand rather than order period-
ically? For given products, intermediate goods
or raw materials, what factors lead customers
to either accumulate demand or order more
frequently? What changes would make it more
likely for customers to order more frequently;
i.e., how much would order processing or
shipping costs have to decline to make more
timely and accurate ordering worthwhile?
• Describe recent cases where the customer
faced an over- or understock situation.
What caused these? Did the customer face any
negative consequences as a result? If not, who
else in the organization may have?
• How well do individuals one level up in the
supply chain share accurate and timely
demand information? What specific types of
information are most, and least, accurate?
• Can the customer identify any factors (time
of year, type of product, level of detail, level of
stakeholder making the request) that tend to
result in higher or lower quality data that affect
order levels?
• What are the main barriers that prevent the
flow of accurate information? Are they more,
or less, severe than at other organizations at
which the customer worked, or is familiar with?
Why?
• How can the communication channel be
improved to enhance demand forecasting?
What tools or processes are available, or what
has the customer used previously, that would
improve such forecasting?
• What are the various factors (i.e., free return
policies, price variations, etc.) that cause the
most excessive variation in demand for product
“X,” work in progress “Y” or raw material “Z?”
• What incentives (financial, career advance-
ment, job satisfaction, workplace quality) would
make the customer most likely to change behav-
ior “X” (over-ordering, order-batching, etc.)?
Queries that Counter the Bullwhip Effect
4. cognizant 20-20 insights 4
supply chain. They can also gather insights
into where new systems, retraining or poli-
cies will produce the greatest impact.
Bullwhip Scenario #3: Free return policies
allow customers to “game” the system
• Cause: Customers intentionally over-order to
avoid shortages, canceling their orders when
supply becomes adequate. Free return policies
allow them to escape any penalty for such
behavior, but leave manufacturers and distrib-
utors financing what is, in effect, emergency
stock for retailers or distributors.
>> Remediation: Adjust or eliminate such poli-
cies.
>> How market research can help: Surveys
or focus groups of customers can identify
how often, and to what extent, such policies
encourage excess ordering, and which cus-
tomers are the worst offenders. Field trials
with follow-up surveys can assess how well
the elimination or modification of such poli-
cies reduces the inefficiencies caused by the
bullwhip effect.
Bullwhip Scenario #4: Order batching to
cut processing and shipping costs
• Cause: Customers accumulate demand before
placing an order to minimize the time and
cost of order processing or of shipping partial
truckloads. This creates excess variability for
suppliers, especially when a market experienc-
es rapid, short-term changes in demand.
>> Remediation: Implement EDI- or ERP/cloud-
based systems that reduce the cost of plac-
ing orders. It’s also effective to size future
orders based on the actual last three months
of sales. Incentives/penalties can be created
to discourage order batching.
>> How market research can help: Informal
conversations and focus groups can help
identify which factors (order processing or
shipping costs) are most important for dif-
ferent types of customers. Quantitative re-
search can identify the exact level of incen-
tives or penalties that would most effectively
reduce order batching for an organization’s
most important customers.
Bullwhip Scenario #5:
Price fluctuations
• Cause: Special discounts and other price
changes can cause buyers to either rush or
postpone their purchases to get the best
price. Because these changes are not tied to
underlying, long-term demand, they can cause
uneven production and inventory spikes (see
sidebar).
>> Remediation: Improve communication be-
tween internal functions such as produc-
tion and marketing to better identify true
demand levels. Obtain better information
about external events, such as weather,
strikes or political upheaval, that can pro-
duce short-term price distortions.
>> How market research can help: Primary
research may include interviews on specific
Quick Take
When Volvo found itself with extra inventory
of electric cars, its sales organization offered
special deals. This cleared the inventory, but
at the cost of reduced profits.
Production, unaware of the price cut,
assumed the increase in sales was the
result of underlying demand and ramped
up production of electric cars. This created
another oversupply of electric cars, which
the automaker had just sacrificed profit
margins to reduce.1
Several months after Cisco struggled to
deliver enough products to customers, it
faced the opposite problem: $2.2 million
in excess inventory that had to be written
down.
The reason, according to a supplier quoted
in CIO Magazine, was fear of being caught
short again. “Procurement needs 100 of a
part, but they know if they ask for 100, they’ll
get 80. So they ask for 120 to get 100,” said
the supplier. “People see a shortage and
intuitively they forecast higher.”2
Bullwhip Effect: Oversupply
Resulting from Lack of
Internal Communication
Bullwhip Effect: Excess
Inventory Resulting from
Expected Shortages
5. cognizant 20-20 insights 5
events that lead to over- or under-ordering
to uncover deeper, more systemic problems.
Correlating historical data on price changes
with over- or under-ordering can identify
which specific price changes triggered the
bullwhip effect among specific decision-
makers. Follow-up surveys can draw out
more subtle factors such as how large of a
price change triggers a change in buying
behavior. Field trials can test which kinds of
internal communication would do the most
to reduce the bullwhip effect.
Looking Ahead: Next Steps
With slow, uncertain growth in global economies,
producers and suppliers at each link in the supply
chain cannot afford to lose sales and market
share by under-ordering. Nor they can afford the
extra expense of rush shipments or peak prices
for raw materials to meet unexpected demand.
Whether it’s a supplier, manufacturer, distributor
or retailer, no link in the supply chain can afford
guesswork, fudging, hopes or old data when
placing or filling orders. When conventional reme-
diation techniques fail to reduce the bullwhip
effect, market research can help uncover the
hidden needs, desires, fears and assumptions that
are actually to blame.
Footnotes
1
“Bullwhips and Beer: Why Supply Chain Management Is So Difficult,” Forio, March 10, 2006,
http://forio.com/blog/bullwhips-and-beer/.
2
Scott Berinato, “What Went Wrong at Cisco in 2001,” CIO Magazine, Aug. 1, 2001,
http://www.cio.com/article/30413/What_Went_Wrong_at_Cisco_in_2001.
References
• Edith Simchi-Levi, “The What, Why and How of Supply Chain Analytics,” OPSrules, June 12, 2013,
http://www.opsrules.com/supply-chain-optimization-blog/bid/297730/The-What-Why-How-of-Supply-
Chain-Analytics.
• “Unfolding Forecasting,” The Decision-Makers Direct, http://www.decisioncraft.com/dmdirect/fore-
casting.htm.
• “Data Analytics in the Consumer Packaged Goods Industry,” The Edge Blog, July 1, 2013,
http://cgnedge.blogspot.in/2013/07/data-analytics-in-consumer-packaged_1.html#!/2013/07/data-
analytics-in-consumer-packaged_1.html.