Lack of Supply Chain Coordination and The Bullwhip Effect
Lack of Supply Chain Coordination and The Bullwhip Effect
Lack of Supply Chain Coordination and The Bullwhip Effect
EFFECT
Supply chain coordination – all stages in the inventory network make
moves together (normally brings about more prominent absolute store
network benefits)
Bullwhip Effect
Profitability (decreases)
Operational Obstacles
Pricing Obstacles
Behavioral Obstacles
Incentive Obstacles
Operational Obstacles
Actions taken in the course of placing and filling orders that lead to an
increase in variability
Pricing Obstacles
Behavioral Obstacles
Each stage of the supply chain views its actions locally and is unable to
see the impact of its actions on other stages
Different stages react to the current local situation rather than trying to
identify the root causes
Based on local analysis, different stages blame each other for the
fluctuations, with successive stages becoming enemies rather than
partners
No stage learns from its actions over time because the most significant
consequences of the actions of any one stage occur elsewhere, resulting
in a vicious cycle of actions and blame
Alter sales force incentives from sell-in (to the retailer) to sell-through
(by the retailer)
o EDI is useful
o “Turn-and-earn”
o Information sharing
Stabilizing pricing
Background
o Dependability
o Leap of faith