Abstract
Bullwhip (or whiplash) effect is an observed phenomenon in forecast driven distribution channel and careful management of these effects is of great importance to managers of supply chain. Bullwhip effect refers to situations where orders to the suppliers tend to have larger variance than sales to the buyer (demand distortion) and the distortion increases as we move up the supply chain. Due to the fact that demand of customer for product is unstable, business managers must forecast in order to properly position inventory and other resources. Forecasts are statistically based and in most cases, are not very accurate. The existence of forecast errors made it necessary for organizations to often carry an inventory buffer called 'safety stock'. Moving up the supply chain from the end users customers to raw materials supplier there is a lot of variation in demand that can be observed, which call for greater need for safety stock. This study compares the efficacy of simulation and Time Series model in quantifying the bullwhip effects in supply chain management. .
Highlights
Chain exists due to the fact that it is difficult for any company to provide all that is required from raw materials to final products and at the same time getting the products to the end users
There are many factors that contribute to bullwhip effect, the need to understand a manufacturing company’s supply chain management to be able to assess the level of effect the factors have on its supply chain
The objective of this study is to compare the efficacy of simulation and time-series model in quantifying bullwhip effect in supply chain
Summary
Chain exists due to the fact that it is difficult for any company to provide all that is required from raw materials to final products and at the same time getting the products to the end users. Organizations are being forced to decrease profit margins and cope with changing government regulations on taxes, tariffs and the protection of the environment, to remain competitive. To cope with these pressures, organizations must consider the impact of operational decisions on their own firm and all members of their supply chain. The frequency in the changes experienced by inventory may arise as a result of order smoothing which can later translate into poor customer service. This is often due to inaccurate information within the supply chain, leading to bullwhip effect. Instability in supply chain do result to holding excessive inventories, poor customer service, and unnecessary capital investment
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