The Bullwhip Effect in Supply Chains
Prof Stephen Disney, Cardiff University Business School
Followed by Quiz and Dinner
The next SWORDS meeting of the 2014-2015 programme is scheduled for Wednesday the 10th of December 2014. The meeting will be held at the Mathematics Institute, Cardiff University. There will be drinks available from 5.45pm in the Internet Café which is just inside the main entrance to the Mathematics Institute. The talk will commence at 6.00pm in room M/0.40 (ground floor). This will be followed by a quiz and food starting at approximately 6.30pm.
There is a charge for the social of £5 for OR Society members and £10 for others (partners are welcome). We need to know in advance who is coming so please let me know asap if you wish to attend. Also let me know if you would like the vegetarian option.
Please contact Jonathan Thompson, tel: 029-20875524
Supply chains are victims of a dynamical effect called the “Bullwhip Effect”. The bullwhip effect refers to the tendency of the variability of replenishment orders to increase as they pass through the echelons of a supply chain from retailers towards producers and raw material suppliers. A classic example of the effect is baby nappies or diapers. Babies are fairly regular in their use of nappies - they have a new nappy (almost) every time they feed. Sure, the retail sales on a day-to-day basis fluctuate a little, but the demand patterns experiences by the diaper manufacturer are the widely fluctuating and the erratic production rates experienced in the factory can result in a lot of easily avoidable costs.
This bullwhip effect is caused by the fundamental structure of a supply chain. As it takes time to order, manufacture and deliver product, forecasting procedures have to be used to predict future demands and position the supply chain to meet them. These forecasting mechanisms are then used inside replenishment systems and together they amplify the variability of replenishment orders. Other factors also contribute; batch sizing, process capability and uncertainty, promotions and shortage gaming.
This talk first discusses the bullwhip effect and explains why it is important. A (very) brief introduction of the theory behind the phenomena is then highlighted. This is followed by a review of the mitigation and avoidance strategies that are available to allow companies to reduce the bullwhip effect and its impact. Finally, a summary of some cases where bullwhip avoidance has been achieved will be given.