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Bullwhip Effect Questions
Terms in this set (12)
What is a typical structure of a supply chain?
Supplier →Manufacturer → Wholesaler →Distributor → Retailer → Customer
What parties can be involved in the supply chain?
Customer → Producer → You → Your factories → Your stores
What is the supply chain?
a network of organizations and facilities that transforms raw materials into products delivered to customers. Customers order from retailers, who order from distributors, who order from manufacturers, who order from suppliers.
Why is good supply chain management a positive thing?
Good supply chain management allows you to react to outside forces faster (such as natural disasters, periods of high/low demand)
What are the benefits to good supply chain management?
It results in low costs, is more efficient, and ensures that each member of the supply chain is fully informed of changing conditions
What is the bullwhip effect?
The bullwhip effect is where variations of inventory are amplified as you move up the supply chain from consumer to end raw material supplier when there is a change in consumer demand and no information is being shared about consumer demand between all members in the supply chain which will leave suppliers, manufacturers, distributors, and retailers with very high or low inventory.
How does the bullwhip effect impact a business in a bad way?
-can lead to over supply and thus to much inventory, ornot enough supply and thus empty inventory
-it demands forecast updating (you have to guess custoer demand) and it causes price fluctuations
-poor customer service
-high costs for customer sales
How do we reduce bullwhip effect?
We can reduce the bullwhip effect by sharing consumer demand information at all parts in the supply chain
-minimize turn around time, use technology
-align all levels of production
How does Zara reduce the bullwhip effect?
Zara vertically integrates itself by controlling all aspects of their supply chain
How does Walmart reduce the bullwhip effect?
Walmart communicates with the members of its supply chain and shares customer information so they can be prepared for changes in demand, and this match the supply
Should companies be vertically integrated like Zara?
Horizontal/verical integration is irrelevant because as long as all members in a supply chain communicate effectively to ach other there will beno bullwhip effect.
What is disintermediation?
cutting out the middle men. i.e. wholesales, distributors, and/or retailers in order to reduce costs and lag time between members in the supply chain