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Operations And Supply Chain Management
Found in: Page 421
Operations And Supply Chain Management

Operations And Supply Chain Management

Book edition 14th
Author(s) F. Robert Jacobs
Pages 800 pages
ISBN 9780078024023

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Short Answer

A phenomenon characterized by increased variation in order as we move from the customer to the manufacturer in the supply chain

The bullwhip effect is characterized by increased variation in order as we move from the customer to the manufacturer in the supply chain.

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Step by Step Solution

Step 1: The bullwhip effect

The ripple effect is a sales channel phenomenon in which demand projections cause supply chain inefficiencies. As one advances further in the supply, it refers to larger inventory swings in reaction to changing consumer demand.

Step 2: Causes of bullwhip effect in supply chain

  1. Enhancing demand forecasts: Supply chain members update their demand forecasts.
  2. Order batching: When members of the supply chain raise or reduce the number of orders, this is known as order batching.
  3. Price variations: Discounting is usually the driving force, resulting in higher purchases.
  4. Rationing and gaming: Buyers and sellers supply amount greater than or less than those specified in their orders.

The bullwhip effect could also be reduced by focusing on the following areas:

  1. Lead times are shorter
  2. Reordering techniques to be revised/better forecasting methods to be used
  3. Price fluctuation limitations
  4. Integration of performance assessment and planning

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