Transcription of The Bullwhip Effect in Supply Chains
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The Bullwhip Effect in Supply Chains SPRING 1997 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? Hau L. Lee V. Padmanabhan Seungjin Whang Vol. 38, No. 3 Reprint #3837 The Bullwhip Effect in Supply Chains Hau L. Lee V. Padmanabhan Seungjin Whang Distorted information from one end over time. However, when they examined the orders from the reseller, they observed much bigger swings. of a Supply chain to the other can Also, to their surprise, they discovered that the orders from the printer division to the company's integrated lead to tremendous inefficiencies: circuit division had even greater fluctuations.
whip effect: 1. Demand forecast updating 2. Order batching 3. Price fluctuation 4. Rationing and shortage gaming Each of the four forces in concert with the chain’s infrastructure and the order managers’ rational deci-sion making create the bullwhip effect. Understanding the causes helps managers design and develop strate-gies to counter it.5
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