Tuesday, January 29, 2013

Decreasing the bullwhipping effect

          This weeks article on building flexible supply chains and the bullwhip effect caught my attention.  The bullwhip effect refers to distortions that occur in information that flows through a company’s suppliers that can enable small changes to become much larger and less predictable changes in demand.  This effect can have a crippling effect on companies from retailers to the raw material suppliers.  It can also be a deciding factor in companies considering internal changes such as becoming more flexible and making decisions more quickly. 
          This information led me to look into companies to see which are viewed as more flexible organizations.  Walmart’s distribution center is a key example of how supply chains can become more flexible as they utilize demand-driven supply chains, which respond to customer orders.  This is accomplished through point of sale data that is sent several times per day, enabling visibility of customer demand.  This is one way in which Walmart has many advantages over their competitors including improved in-store variety and selection and highly competitive pricing for consumers[1].
          Another factor that is said to decrease the bullwhip effect includes just in time (JIT) production.  Harley Davidson is known for using JIT, which helped process inefficiencies to be identified.  Through the implementation of this production system Harley Davidson has been able to increase productivity, decrease inventory levels by 75% and make other positive results[2].  This is just one of the positive examples of how changes to supply chains and production strategies can hinder the bullwhip effect from occurring.
          Despite these positive examples of companies implementing programs that help to reduce this effect it is still a problem that plagues organizations.  While some companies have the luxury of implementing new processes such as becoming a demand-driven supply chain or using just in time production, others cannot afford to make such significant changes.  However other companies can implement potentially less costly opportunities including renegotiate contracts and trying to work as a single team with their retailers and others along the supply chain. 

Question: What are other examples of programs or changes that companies have accomplished as a result of experiencing the bullwhip effect?    



[1] http://www.usanfranonline.com/wal-mart-successful-supply-chain-management/
[2] http://www.brighthubpm.com/methods-strategies/71540-real-life-examples-of-successful-jit-systems/

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.