Bullwhip Effect·Refers to the phenomenon where order variability increases as theordersmoveupstreaminthesupplychain·Bullwhipcosts:settingupand shuttingdownmachines,: idling and overtime in the workload,. hiring and firing of the workforce,:excessiveupstreaminventory,.difficultyinforecastingandscheduling,:systemsnervousness,and:poorsupplier/customerrelationships
Bullwhip Effect • Refers to the phenomenon where order variability increases as the orders move up stream in the supply chain • Bullwhip costs • setting up and shutting down machines, • idling and overtime in the workload, • hiring and firing of the workforce, • excessive upstream inventory, • difficulty in forecasting and scheduling, • systems nervousness, and • poor supplier/customer relationships •
.Causes.Irrational-overlook the inventory-on-order (the orders placed but not yetreceived),:Rational (Leeetal.,1997)demandsignalprocessing·batchordering,.pricefluctuation,and·shortagegaming
• Causes • Irrational – overlook the inventory-on-order (the orders placed but not yet received), • Rational (Lee et al., 1997) • demand signal processing, • batch ordering, • price fluctuation, and • shortage gaming
·Remedies:Informationsharing:Vendormanaged inventory (VMI):Lead timereduction:Centralized inventoryplanning·Capacityflexibility
• Remedies • Information sharing • Vendor managed inventory (VMI) • Lead time reduction • Centralized inventory planning • Capacity flexibility
·Methodologies used to studybullwhip effect:Empirical:Experimental:Analytical:Simulation
• Methodologies used to study bullwhip effect • Empirical • Experimental • Analytical • Simulation
: An empirical study by Shan et al. (2014):Withinafirm:Quarterlydata onover1200 companies listed onthe Shanghai and Shenzhenstockexchangesfrom2002to2009:DatapreprocessingBullwhipratio=Volatilityofproductionovervolatilityof demand:Independent Variables include inventorydays, seasonalityratio, AR(1)coefficientfor demand shock,profit margin, firm size,and days accountspayable·Regressionmodel
• An empirical study by Shan et al. (2014) • Within a firm • Quarterly data on over 1200 companies listed on the Shanghai and Shenzhen stock exchanges from 2002 to 2009 • Data preprocessing • Bullwhip ratio = Volatility of production over volatility of demand • Independent Variables include inventory days, seasonality ratio, AR(1) coefficient for demand shock, profit margin, firm size, and days accounts payable • Regression model