Question

How might the bullwhip effect occur with a company such as Coca-Cola?

Answer 1

Bullwhip effect occurs when there is a mismatch in the sales forecast. The supply chain of the company involves the supply of the products to the customers and the company keeping a track of the demand for the product. But a wrong forecast can make the company face the problem of out of stock or excessive inventory. The problem arises when there is no coordination among the manufacturer, customers, suppliers, and the sales division. Each of these divisions depends on others to make their decisions and this leads to Bullwhip effect. Coca-Cola is a soft drink manufacturer and it mainly relies on its supply chain for its business. Only a successful coordination between the above-mentioned divisions can help the company achieve the desired sales. If Coca-Cola fails to make a good forecast of their sales then it can definitely lead to the Bullwhip effect. The sales department of the company will run a promotional offer and this led to an increased sales. The manufacturing team will not be aware of the promotion and they think the increase in sales in organic and they will increase the production. This will result in excess inventory and the company will face the Bullwhip effect.