Question

What is the Bullwhip Effect? Why does it occur? How can it be overcome?

Answer 1

Bullwhip effect represents supply chain inefficiencies hereby small deviations throughout the supply chain process results in a significant gap in the inventory management process as we go up the supply chain processes. It can be attributed to a number of reasons from insignificant documentation and reporting to variability in customer demand, bulk purchasing, etc.

Since the bullwhip effect follows the supply chain, we need to carefully monitor the flow of inventory and goods at each stage of the process. Data should, therefore, flow seamlessly between all the various aspects of the supply chain process, from the manufacturer or supplier to the production and even till marketing. Knowledge management or the sharing of relevant data equally between all the departments is necessary. We need to align the supply chain processes with the forecast rather than making arbitrary decisions when demand shows a change and establish a long term process of supplier management in order to reduce inaccuracies from their side as well.

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