INTRODUCTION TO THE FORUM ON THE BULLWHIP EFFECT IN THE CURRENT ECONOMIC CLIMATE

Abstract

As one of the Co-Editors-in-Chief of the Journal of Supply Chain Management, I am pleased to bring to you this special topic forum on the Impact of the Bullwhip Effect in the Current Economic Climate. The seeds for the forum were planted in conversations with our Associate Editors, some of whom indicated that it would be beneficial if the Journal could publish on select topics of current concern in a timely fashion. In addition, it was noted by some of our Associate Editors that it would be excellent if we could demonstrate, based on current issues, how relevant SCM theory illuminates, and is informed by practice. When one of my students at Miami University sent me a link to the Wall Street Journal article, “Clarity is Missing Link in Supply Chain” (Dvorak 2009), and I forwarded it to colleagues and Associate Editors, the idea for this forum blossomed. While the Journal is primarily a scholarly journal, as a Journal that focuses on empirical research, the real world is our laboratory. We are, after all, social scientists. While much of the world stood by in wonder in the late fall of 2008 while demand dried up for many consumer products and durable goods, those of us engaged in supply chain research shook our heads, thinking, “These companies built too much inventory, and could not respond quickly enough.” As the OEMs began to cancel their orders and halt production, we shook our heads again, thinking, “They are using up their safety stock and clearing out their pipelines. Are they ready for a recovery, when that occurs?” An unplanned and rapid spike in demand occurred in the auto industry as a result of the “Cash for Clunkers” program. This steep spike in demand, amounting to a 50% month-over-month increase for many suppliers, hit an industry that had cut itself to the bone, and had suffered many casualties in its supply base. Cash for Clunkers accelerated many suppliers from shut down or reduced shifts to overtime (Barkholz and Sherefkin 2009). As noted by one senior industry analyst, “Cash for Clunkers sent the sales rate on a wild roller coaster ride,” (Isidore 2009). The automotive industry was generally not prepared. How could they be prepared for such a large and rapid demand shift? While many of the auto industry executives were optimistic that “Cash for Clunkers” would jump-start sales for the remainder of the year, even after the Cash for Clunkers program was complete (Isidore 2009), initial indicators are that this is not the case. Industry analysts currently predict that the automakers will have to raise incentives again, in this “… vicious circle” (Krebs 2009). Thus, the bullwhip rolls on, and always creates an exciting ride. Our esteemed contributors to this special topic forum were chosen for their deep knowledge and many years of experience in supply chain management. We want to thank these thought leaders in our field for their timely and insightful responses to our forum. First, we have Corey Billington, whose piece “Cycles Are Cycles” gives us appreciation of how firms can use the theory of the bullwhip effect to help them dampen the impact of the bullwhip both in good times and in bad, with an emphasis on improved collaboration with the supply base. Next, Hau Lee contributes, “Taming the Bullwhip,” which focuses on how firms can use their knowledge of the bullwhip in understanding uncertainty, and creating supply chain visibility and collaboration. Yossi Sheffi contributes, “What Does Not Kill Me, Makes Me Stronger,” which considers what will likely happen to the average, unprepared firm as we emerge from this economic cycle. Linda Sprague and Thomas Callarman remind us that, “Supply Management Is Not a Beer Game,” and provide insight into how the bullwhip effect is playing out in China in this economic cycle. Finally, Kevin Dooley and his colleagues Tingting Yan, Srimathy Mohan and Mohan Gopalakrishnan provide an invited, peer-reviewed paper, “Inventory Management and the Bullwhip Effect During the 2007–2009 Recession: Evidence from the Manufacturing Sector,” which provides awareness into what has happened at several levels in the supply chain during this current economic cycle. We at the Journal are deeply grateful to these authors for taking the time to provide us with their valuable perspectives into the bullwhip effect today. Each of these pieces offers unique insight that we hope will be valuable to you in your viewpoint of the bullwhip effect. We hope that this forum will generate lively discussions, and ideas for future research. It is also a good reminder that what we research and teach in the field of supply chain management can make a worthy contribution to theory and shape improved practice.