Applying VMI To Eliminate Bullwhip Effect In The Supply Chain Management

Since 1990s, the issue of the supply chain management (SCM) is getting more and more popular in academic circle and enterprises. Efficient SCM enables enterprises to meet challenges caused by uncertain market and rapid technical innovation, to exert their potential fully, and so as to construct their core competitive advantages. There is one common phenomenon in the supply chain called "Bullwhip Effect". The so-called Bullwhip Effect is that tiny changes of demand downstream will cause enormous fluctuation upstream. That is the closer to the upstream, the bigger the fluctuation. It can lead to tremendous inefficiency for the supply chain system, consequently followed by excessive inventory, imbalance between demand and manufacturing capacity, and reduction of customer service level. If given appropriate treatment, eliminating the bullwhip effect can increase enterprise's profitability by 10—30%. So the mastery of its causes and countermeasures is critical to enhance efficiency in the supply chain.This dissertation elaborates the impacts of bullwhip effect upon supply chain, illuminates the causes of bullwhip effect and its economic explanation. On the basis of scholars' researches, this dissertation brings forward correspondent countermeasures against bullwhip effect. It is discussed that sharing of demand information is an important way to eliminate bullwhip effect. However, it is difficult for varied enterprises in the supply chain to share demand information completely. So this dissertation uses the model of Vendor Managemed Inventory (VMI), and analyzes quantificational the values of using VMI to eliminate Bullwhip Effect in the Supply Chain. It studies how to construct a strategy partnership relationship among the enterprises in the supply chain while practice VMI model and also searches for the ways of making partnership contracts among them. On the basis of the above work, this dissertation put its endeavor to build a VMI model on the basis of Internet/Intranet in order to fulfill the information sharing upon enterprises in the supply chain, so as to eliminate the bullwhip effect of supply chain. At last this dissertation studies the president status of applying VMI insupply chain of China and analyzes the problem of applying VMI. Then it provides the strategy of VMI applying which is more suitable for our country's conditions.