Mitigating the Bullwhip Effect and Enhancing Supply Chain Performance through Demand Information Sharing: An ARENA Simulation Study

The supply chain is a network of organizations that collaborate and leverage their resources to deliver products or services to end-customers. In today's globalized and competitive market, organizations must specialize and form partnerships to gain a competitive edge. To thrive in their respective industries, organizations need to prioritize supply chain coordination, as it is integral to their business processes.   Supply chain management focuses on the collaboration of organizations within the supply chain. However, when each echelon member optimizes their goals without considering the network's impact, it leads to suboptimal performance and inefficiencies. This phenomenon is known as the Bullwhip effect, where order variability increases as it moves upstream in the supply chain. The lack of coordination, unincorporated material and information flows, and absence of ordering rules contribute to poor supply chain dynamics. To improve supply chain performance, it is crucial to align organizational activities. Previous research has proposed solutions to mitigate the Bullwhip effect, which has been a topic of intense study for many decades. This research aims to investigate the causes and mitigations of the Bullwhip effect based on existing research. Additionally, the paper utilizes ARENA simulation to examine the impact of sharing end-customer demand information. As far as we are aware, no study has been conducted to deeply simulate the bullwhip effect using the ARENA simulation. Previous studies have investigated this phenomenon, but without delving into its intricacies. The simulation results offer potential strategies to mitigate the Bullwhip effect through demand information sharing. Keywords: Supply Chain Management, Bullwhip effect, Inventory management, ARENA simulation, Information sharing, forecasting technique, Demand variability. DOI: 10.7176/JESD/14-14-07 Publication date:August 31st 202

Taming the bullwhip effect whilst watching customer service in a single supply chain echelon

We study a generalised order-up-to policy that has highly desirable properties in terms of order and inventory variance and customer service levels it generates. We quantify exactly the variance amplification in replenishment orders, i.e. the bullwhip effect, and the variance of inventory levels over time, for i.i.d. and the weakly stationary auto regressive (AR), moving average (MA) and auto regressive moving average (ARMA) demand processes. We demonstrate that high customer service as measured by fill-rate, and smooth replenishments need not increase inventory cost substantially. We observe that in some instances of the ARMA demand pattern this comes at the expense of a relatively small increase in safety stock, whilst in other instances inventory levels can actually be reduced

Development of a Decision Support Tool for the Process of Deciding Inventory Levels : A Study at The Absolut Company

Background: Supply Chain Management is receiving increased attention as companies are trying to remain competitive in a global and challenging environment. An important topic to consider when managing the supply chain is inventory control. Companies today have enormous investments in inventories, which means that there are potential improvements regarding tied up capital in raw materials, work-in-progress and finished goods. There are a variety of tools available in the theory to support the process of determining inventory levels, but these general tools are not suitable for every company. Problem description: This master thesis was conducted at The Absolut Company (TAC) – a large spirits manufacturer. They are responsible for the production of Absolut Vodka, a premium vodka brand. As for any manufacturing company it is crucial that the production constantly has material available to avoid stoppages in the lines. The inventory of the bottle cap, which is one of the materials used in the production process, has historically been kept high to ensure constant supply, but now TAC has started to question if these is managed correctly. Hence, there is a desire from TAC to develop a better understanding of what is affecting the inventory levels. There is also a need for an analytical tool that supports the decision making process related to the inventory levels of the bottle caps. Purpose:The purpose of this master thesis is to investigate which factors affect the inventory levels of bottle caps at TAC and to develop a decision support tool for the process of determining appropriate inventory levels for the bottle caps. Research questions: 1. What factors are affecting the inventory levels at TAC? 2. How do the identified factors affect the inventory levels of bottle caps at TAC? 3. How should a tool for deciding appropriate inventory levels of the bottle caps at TAC be designed? Methodology: The research approach for this thesis is a systems approach and the research is performed inductively. A case study has been chosen as research strategy and the design of the case is single case and single unit of analysis. The system is studied by analyzing both qualitative (interview and observations) and quantitative data (operational data from TAC’s ERP system). The quality of the research is evaluated based on the dimensions reliability and validity. Conclusion: During the analysis it was concluded that the factors affecting the inventory levels at TAC come from the cycle and safety inventory. The identified factors associated with the cycle inventory were supplier lead time, purchase batching and production batching, while the factors affecting the safety inventory were forecast accuracy, quality defects, delivery reliability and delivery dependability. From the analysis it was concluded that the factors purchase batching, forecast error and delivery reliability contributed the most to the inventory levels at TAC. The decision support tool was designed to suggest appropriate inventory levels and to give the user an overview of how much each factor contributes to the inventory. In the tool a baseline scenario, reflecting the current situation, and two alternative scenarios are presented. One scenario shows appropriate inventory levels to cover for the mean error and the other scenario is calculated to cover for the maximum error. The tool also gives the user an overview of all the factors affecting the inventory levels of caps that can be used to spread the information in the company and create understanding across departments. Furthermore, the decision support tool can be used to analyze how improvements or deteriorations of the factors affect the inventory levels, to support TAC’s supply chain department in deciding which improvement project should be prioritized

Summer of ... pollution prevention intern program : case summaries, 2013

This document explains the program overview, student & company perspectives, director's notes, executive summary of the Pollution Prevention Intern Program. Each intern, company and their case study project is explained

Supply management and procurement at a South African FMCG company : a practical example of developing a decision support tool for managing direct material cost

Thesis (MComm)—Stellenbosch University, 2016.ENGLISH ABSTRACT: One of the functions within the supply chain of manufacturing companies is the procurement of direct materials that are needed for the production of products sold to consumers. Even though the process of purchasing materials was always required within the manufacturing process, it only recently gained attention on management level. Today, organisations set up centralised procurement functions that develop global sourcing strategies in order to align procurement processes, people and technology. The goal is to reduce total cost while maintaining high quality, availability and service levels. However, procurement functions are challenged by a number of risks during its global sourcing activities that can have major impacts on direct material cost. Johnson & Johnson is a major global player within the Fast Moving Consumer Goods (FMCG) industry and acknowledged a significant sense of uncertainty relating to the identification and measurement of direct material cost drivers within their global procurement function. Even though Johnson & Johnson is aware that the economic environment has an impact on its procurement spend, it has a limited ability to measure and quantify these effects. Based on the case of Johnson & Johnson, this study’s objective was to develop a decision support tool that measures and analyses the impact of cost drivers on direct material cost. The aim was to develop a model that can be used by procurement professionals in industry in order to provide insight into the procurement cost structure and to identify opportunities that can lead to risk and cost reduction. A case study research design was followed, which included secondary and primary research to collect qualitative and quantitative data. The research methods included observations and input discussions at the company, as well as a comprehensive model development process, which was used in order to create the decision support tool. As the decision support tool was developed on the case of Johnson & Johnson, data were collected from the company in order to test the model and generate outputs. Following the individual process steps of the development process resulted in a highly structured and documented approach to develop the decision support tool. Two major cost drivers of procurement spend when conducting global sourcing were identified: fluctuating exchange rates and volatile commodity markets. Both of these cost drivers were analysed and included during the decision-support tool development process. As a result, a decision support tool is presented that provides functionality to measure the exposure and the potential impact value of the first-tier currency impact, second-tier currency impact as well as the inflation impact. Furthermore, “what-if” and scenario analyses provide a predictive view based on actual forecasts. As an additional output, the decision support tool provides detailed insight and transparency of the total procurement spend, providing important information for decision makers.AFRIKAANSE OPSOMMING: Een van die funksies in die voorsieningsketting van vervaardigingsmaatskappye is die verkryging van direkte materiaal wat benodig word vir die vervaardiging van produkte wat aan verbruikers verkoop word. Hoewel die proses van materiaalaankope nog altyd binne die vervaardigingsproses nodig was, het dit eers onlangs op bestuursvlak aandag getrek. Vandag stel organisasies gesentraliseerde verkrygingsfunksies saam wat globale strategieë ontwikkel vir die verkryging van hulpbronne om sodoende verkrygingsprosesse, mense en tegnologie met mekaar in ooreenstemming te bring. Die doel is om totale koste te verminder terwyl hoë gehalte, beskikbaarheid en diensvlakke gehandhaaf word. Tydens die globale verkrygingsaktiwiteite word daardie funksies egter deur ’n aantal risiko-uitdagings in die gesig gestaar wat ’n groot impak op direkte materiaalkoste kan hê. Johnson & Johnson is ’n vername wêreldspeler binne die industrie vir vinnig bewegende verbruikersgoedere (VBVG) en herken ’n beduidende gevoel van onsekerheid wat verband hou met die identifisering en meting van direkte materiaalkostedrywers binne hulle globale verkrygingsfunksie. Hoewel Johnson & Johnson daarvan bewus is dat die ekonomiese omgewing ’n impak op hulle verkrygingsbesteding het, beskik hulle oor beperkte vermoë om hierdie effekte te meet en te kwantifiseer. Gegrond op die geval van Johnson & Johnson, was hierdie studie se doelwit om ’n besluitsteunhulpmiddel te ontwikkel vir die identifisering en meting van direkte materiaalkostedrywers. Die oorhoofse doel was om ’n model te ontwikkel wat deur verkrygingsberoepslui in die bedryf gebruik kan word om insig in die verkrygingkostestruktuur te voorsien, en om geleenthede te identifiseer wat na risiko en kostevermindering kan lei. ’n Gevallestudienavorsingsontwerp is gevolg wat primêre en sekondêre navorsing ingesluit het vir die versameling van kwalitatiewe en kwantitatiewe data. Die navorsingsmetodes het waarnemings en besprekings by die maatskappy sowel as die omvattende modelontwikkelingsproses ingesluit om hierdie besluitsteunhulpmiddel te skep. Aangesien die besluitsteunhulpmiddel op die geval van Johnson & Johnson berus, is data van die maatskappy versamel om sodoende die model te toets, en uitset te genereer. Die volg van die individuele stappe van die ontwikkelingsproses het gelei tot ’n hoogs gestruktureerde en gedokumenteerde benadering in die ontwikkeling van die besluitsteunhulpmiddel. Twee belangrike kostedrywers van verkrygingbesteding in die uitvoer van globale verkryging is geïdentifiseer: wisselkoersfluktuering en onbestendige kommoditeitsmarkte. Albei hierdie kostedrywers is ontleed en ingesluit tydens die ontwikkelingsproses van die besluitsteunhulpmiddel. Gevolglik word ’n besluitsteunhulpmiddel gebied wat funksionaliteit verskaf om die blootstelling en potensiële impakwaarde van die eerstevlakvaluta-impak, tweedevlakvaluta-impak, sowel as die inflasie-impak te meet. Verder verskaf “wat as”- en scenario-ontledings voorspellende beskouings wat op werklike vooruitskattings gegrond is. As bykomende uitset verskaf die besluitsteunhulpmiddel gedetailleerde insig en deursigtigheid van die totale verkrygingbesteding, en verskaf sodoende belangrike inligting vir besluitnemers

Vertical Versus Horizontal Line Extension Strategies: When Do Brands Prosper?

The results from prior research regarding the effectiveness of product line extension strategies on market-level brand performance are equivocal. Some studies show that brands benefit from horizontal line extensions while other studies show vertical line extensions as being a preferable approach to brand leveraging within a product category. This research proposes that the brand assortment size at time t, can moderate the effectiveness of vertical versus horizontal extensions in time t on quarterly market-level brand performance. Aggregated scanner data of twelve toothpaste brands sold for six years at a major Midwestern U.S. retailer were used as input to a panel data regression analysis. The results suggest interactive effects among brand assortment size and line extensions with regard to dollar and volume sales brand performance metrics. Implications for optimal line proliferation strategies given the existing assortment size within a retailing planogram are discussed

The effect of vendor managed inventory (VMI) dynamics on the Bullwhip Effect in supply chains

The paper compares the expected performance of a vendor managed inventory (VMI) supplychain with a traditional “serially linked” supply chain. The emphasis of this investigation is the impact these two alternative structures have on the “BullwhipEffect” generated in the supply chain. We pay particular attention to the manufacturer's production ordering activities via a simulation model based on difference equations. VMI is thereby shown to be significantly better at responding to volatile changes in demand such as those due to discounted ordering or price variations. Inventory recovery as measured by the integral of time×absolute error performance metric is also substantially improved via VMI. Noise bandwidth, that is a measure of capacity requirements, is then used to estimate the order rate variance in response to random customer demand. Finally, the paper simulates the VMI and traditional supply chain response to a representative retail sales pattern. The results are in accordance with “rich picture” performance predictions made from deterministic inputs

Analyzing the accountability, systems and efficiency of demand planning processes in a consumer products environment

Thesis (M.B.A.)--Massachusetts Institute of Technology, Sloan School of Management; and, (S.M.)--Massachusetts Institute of Technology, Dept. of Civil and Environmental Engineering; in conjunction with the Leaders for Manufacturing Program at MIT, 2006.Includes bibliographical references (p. 101-103).As consumer products companies like P&G strive to achieve a consumer driven supply network, the value of forecast accuracy comes into question. Many companies push for faster cycle times and shorter supply chains, driving towards make-to-order production. These trends may appear to reduce the importance of forecasts. However, a closer look into P&G and their business reveals that sales forecasts are still very important and have a far reaching impact stretching from the supply network through to Wall Street. This thesis evaluates the forecasting process in a company like P&G. The thesis delves into the accountability around sales forecasts and proposes a top-down, statistical process for creating and tracking forecast accuracy which was implemented across P&G's global organization. Another analysis is conducted on the evaluation of a new demand planning system which provides more granular input data for generating forecasts, and the implications from this trial on the demand planning process. Finally, an assessment on the efficiency of current systems is also detailed.by Christy A. Prilutski.S.M.M.B.A

NONPRESCRIPTION MEDICATIONS AND SELF-CARE Status and Recommendations for Self-Care Instruction in US Colleges and Schools of Pharmacy, 2006

Teachers of pharmacy self-care courses have met annually since 1998 at the Nonprescription Medicines Academy (NMA) held in Cincinnati, Ohio. During these meetings, self-care faculty members discuss methods of enhancing the teaching of self-care in US colleges and schools of pharmacy. Selfcare courses are taught using a variety of methods and content is woven into pharmacy curricula in many different ways. This manuscript sets forth the current state of self-care instruction in pharmacy curricula including the recommended core curriculum, instructional methodologies, course mechanics, existing standards, and assessment and curricular placement, and makes recommendations for the future