The Bullwhip Effect In Supply Chain Management

Due to tight market competition, supply chain management(SCM) now plays an important role in assisting companies to gain competitive advantage. SCM is therefore a key for the firms to achieve multi-company co-operation across traditional mortar and brick enterprises and enables them to pursue and share opportunities in the dynamic marketplace. As SCM is often affected by the production and inventory strategy, information distortion appears in it. Because of these information distortions, the demand order variabilities in the supply chain are amplified as they move up the supply chain even when the downstream consumer sales do not vary much. This kind of phenomenon, called bullwhip effect, creates severe inefficiencies for the whole supply chain. So the emergence of the bullwhip effect in the supply chain is rapidly becoming a research focus. This paper examines the bullwhip effect in supply chain systemically in both qualitative and quantitative ways. Based on the analysis of the supply chain's infrastructure, the existence of the bullwhip effect is discussed. The actual play of the computerized beer game has also been used to show how the bullwhip effect occurs. Furthermore, the harmfulness of the bullwhip effect is surveyed and presented. Then this paper investigates the specific sources claimed for the bullwhip effect, such as demand forecast updating, order batching, inappropriate sales promotion strategies and improper decision-making. Next, mathematical models concerning the bullwhip effect are set up to analyze this effect. Models presented here reveal how the lead time, frequency of demand forecast and the price fluctuation affect the bullwhip effect and prove that information sharing can mitigate the bullwhip effect. In addition, a variety of corrective actions are recommended to reduce the bullwhip effect and improve the efficiency of supply chain management. Finally, the bullwhip effect in Chinese enterprises has been discussed based on the research of Chinese supply chain management.Hopefully, Some of the management ideas and policies in this paper could be act as reference for SCM decision-makers.