Bullwhip effect. Why, Where? True story

March 23, 2010 at 7:04 pm (Product management) (, , , , )

What´s that?

Bad communication and errors between the members and teams in a business or a supply chain. As a result It creates a chain reaction of increased variability in orders along the supply chain.

Source : Google

True story

When volvo found out some stocks in green cars the sales department began new practices to sell these cars. Also these practices had as a base cheapest prices so be able sell these cars

After the new technique the Green cars demand was quite high. Besides the department of production didn’t know anything about this situation started to produce even more green cars.

So its clear these two departments in the same company haven’t been well communicated.

Causes of the bullwhip effect

  • bad predictions(errors in prediction)
  • Information distortion cause by forecasting methods
  • Variation in delivery time
  • Batch ordering
  • Procedures for product promotion

How to solve this issue?

To properly manage the fluctuations in consumer demand, implementing a point-of sale (POS) system with a just-in-time (JIT) inventory system.

Its compulsary if we want to manage the fluctuations in consumption demand ,to implement a ¨point of sale¨ system (POS) with a ¨just in time¨ inventory system. This allows a better electronic communication between the companies or departments in a supply chain.

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1 Comment

  1. Demand #Uncertainty on SC and its effect « Alkis's blogsfera said,

    […] you need to know more information about  the “bullwhip effect” take a look of […]

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