2,606 research outputs found

    Bullwhip effect in supply chain management

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    TO QUANTIFY THE BULLWHIP EFFECT(BWE) IN SUPPLY CHAIN MANAGEMENT(SCM) THROUGH GRAPHICAL TREATMENTS A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request, or demand. The supply chain not only includes the manufacture and uppliers, but also transporters, warehouses, retailers, and finally the end consumers themselves The objective of every supply chain is to maximize the overall value generated. The value a supply chain generates is the difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customer’s request. Supply chain management involves the management of flows of information, product, or funds between and among stages in a supply chain to maximize total supply chain profitability An important phenomenon in SCM, known as the bullwhip effect, which suggests that the demand variability increases as one moves up a supply chain. It is 1989 that Sterman first introduced regarding this effect. Since then, worldwide researches have been carried out by various authors to study different aspects of SCM, causing the bullwhip effect and suggested a number of methods to reduce its effect. The impact of the bullwhip effect is to increase Manufacturing cost, Inventory cost, Replenishment lead time, Transportation cost $ Labor cost for shipping and receiving, for building surplus capacity and holding surplus inventories. The impact of the bullwhip effect is also to decrease ‘Level of Product Availability’, since More run out of stocks in supply chain, and to decrease ‘Relationship Across the Supply Chain’, since each stage tends to blame other stages of the supply chain There are so many minor causes which gives rise to bullwhip effect. But, they can never be quantified through mathematical equations, however, can be controlled through effective managerial levers. Some of theses causes can be pointed out as below, • Lack of supply chain coordination • Lack of information sharing • Lack of trust among the members in SC • Lack of proper incentive scheme • Lack of proper trained sales forces………etc The major causes which increase in variability are projections of future demand expectations, which result in over-exaggerated responses to changes in demand. In 1997 Lee et al. identified five major causes of the bullwhip effect which was all the consequence of the rational behavior of the supply chain members: They are the use of • Demand Forecasting • Batch purchasing OR Ordering Lots • Replenishment lead times • Rationing & Supply Shortages • Price Fluctuations and Safety Stock The loss due to this can be quantified through mathematical equations, and can be controlled effectively, if the factors affecting the bullwhip effect are analyzed properly through proper method. All previous works were only limited on quantifying the bullwhip effect based on common methods of reducing its impact. However, with all these previous works, it is difficult to obtain graphical illustration of the bullwhip effect Our work differs from all previous works mainly because it shifts the focus of the well established and extensively researched order-up-to-level policy and instead looks at all the replenishment policies that are somewhat different. We want to introduce Z- Transfer function’s frequency response plot to study the graphical illustration for the occurrence of the bullwhip effect. However, there are some limitations to the method used. The choice of the replenishment policies is limited since they have to be inherently periodic review policies and have to satisfy the linearity condition As a result of our research finding, we have suggested the organizations always implementing well known order-up-to-level replenishment policy due to lowest associated fixed cost and variable cost, that it is not always advantageous to implement said policy. While, implementing the said policy, they should also consider the loss due to corresponding bullwhip effect. If the bullwhip reduction is going to incur more benefits than the higher inventory management cost, they should rather consider implementing some other replenishment policies than the said well known order-up-to-level replenishment policy

    Managing the bullwhip effect in multi-echelon supply chains

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    This editorial article presents the bullwhip effect which is one of the major problems faced by supply chain management. The bullwhip effect represents the demand variability amplification as demand information travels upstream in the supply chain. The bullwhip effect research has been attempting to prove its existence, identify its causes, quantify its magnitude and propose mitigation and avoidance solutions. Previous research has relied on different modeling approaches to quantify the bullwhip effect and to investigate the proposed mitigation/avoidance solutions. Extensive research has shown that smoothing replenishment rules and collaboration in supply chain are the most powerful approaches to counteract the bullwhip effect. The objective of this article is to highlight the bullwhip effect avoidance approaches with providing some interesting directions for future research

    The impact of freight transport capacity limitations on supply chain dynamics

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    We investigate how capacity limitations in the transportation system affect the dynamic behaviour of supply chains. We are interested in the more recently defined, 'backlash' effect. Using a system dynamics simulation approach, we replicate the well-known Beer Game supply chain for different transport capacity management scenarios. The results indicate that transport capacity limitations negatively impact on inventory and backlog costs, although there is a positive impact on the 'backlash' effect. We show that it is possible for both backlog and inventory to simultaneous occur, a situation which does not arise with the uncapacitated scenario. A vertical collaborative approach to transport provision is able to overcome such a trade-off. © 2013 Taylor & Francis

    Dampening variability by using smoothing replenishment rules.

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    A major cause of supply chain deficiencies is the bullwhip effect which can be substantial even over a single echelon. This effect refers to the tendency of the variance of the replenishment orders to increase as it moves up a supply chain. Supply chain managers experience this variance amplification in both inventory levels and replenishment orders. As a result, companies face shortages or bloated inventories, run-away transportation and warehousing costs and major production adjustment costs. In this article we analyse a major cause of the bullwhip effect and suggest a remedy. We focus on a smoothing replenishment rule that is able to reduce the bullwhip effect across a single echelon. In general, dampening variability in orders may have a negative impact on customer service due to inventory variance increases. We therefore quantify the variance of the net stock and compute the required safety stock as a function of the smoothing required. Our analysis shows that bullwhip can be satisfactorily managed without unduly increasing stock levels to maintain target fill rates.Bullwhip effect; Companies; Cost; Costs; Impact; Inventory; Managers; Order; Replenishment rule; Rules; Safety stock; Supply chain; Supply chain management; Variability; Variance; Variance reduction;

    The value of coordination in a two echelon supply chain: Sharing information, policies and parameters.

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    We study a coordination scheme in a two echelon supply chain. It involves sharing details of replenishment rules, lead-times, demand patterns and tuning the replenishment rules to exploit the supply chain's cost structure. We examine four different coordination strategies; naïve operation, local optimisation, global optimisation and altruistic behaviour on behalf of the retailer. We assume the retailer and the manufacturer use the Order-Up-To policy to determine replenishment orders and end consumers demand is a stationary i.i.d. random variable. We derive the variance of the retailer's order rate and inventory levels and the variance of the manufacturer's order rate and inventory levels. We initially assume that costs in the supply chain are directly proportional to these variances (and later the standard deviations) and investigate the options available to the supply chain members for minimising costs. Our results show that if the retailer takes responsibility for supply chain cost reduction and acts altruistically by dampening his order variability, then the performance enhancement is robust to both the actual costs in the supply chain and to a naïve or uncooperative manufacturer. Superior performance is achievable if firms coordinate their actions and if they find ways to re-allocate the supply chain gain.Bullwhip; Global optimisation; Inventory variance; Local optimisation; Supply chains; Studies; Coordination; Supply chain; IT; Replenishment rule; Rules; Demand; Patterns; Cost; Structure; Strategy; Retailer; Policy; Order; Variance; Inventory; Costs; Options; Variability; Performance; Performance enhancement; Firms;
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