Coping with Uncertainty: Reducing “Bullwhip” Behaviour in Global Supply Chains

Abstract

All supply chains suffer the effects of uncertainty. One of the most documented (and painful) symptoms is upstream order magnification known as the “Bullwhip Effect”. We believe that companies which cope best with uncertainty via an effective supply chain strategy are most likely to produce internationally competitive bottom-line performance. Although uncertainty takes many forms four key areas within a supply chain structure can represent these. These key segments are the supply side, manufacturing process, process controls and demand side. They may be combined to form the uncertainty circle. It is manifest that the uncertainty present within each of the quadrants must be reduced to maximise competitive advantage and hence market share. The paper therefore proposes a set of actions, which will reduce supply chain uncertainty caused by demand amplification (or the “bullwhip effect”) irrespective of source. The methodology is shown to apply to a wide range of realworld supply chains.