Managing Internal Bullwhip Effect to Plan Product Distribution in a Garment Factory

Abstract

XYZ is a family garment business established in 2004. XYZ produces and sells garments for 6-12 years old boys with brands like Forboys, Wellboy, Nashkid, Yepao, and Kid Dreams. The types of garments are oblong, setelan and wangky. XYZ has three garment Cut-make-trim (CMT) partners in Rangkas, Serang and Pandeglang. The three CMT partners has been giving XYZ neat and tidy garment products, ready to compete in Tanah Abang wholesale center. Based on the demand forecast calculation XYZ sends its order for production to the CMTs. In return, based on the quantity ordered, the CMTs order the raw materials from XYZ. This study attempts to measure the “internal” bullwhip effect which is observed as the fluctuations of orders sent by the CMTs to XYZ, based on the production orders from XYZ to the CMTs. XYZ experienced high inventories and its mounting costs due to this internal bullwhip effect. Further, the method used in this study investigate the appropriate forecasting method. The best forecasting method is the Double Exponential Smoothing, which also results in the reduction in the bullwhip effect ratio, and improvement of scrap factor (around 10.60%). The reduction of BE ratio is quite significant from 0.344, 0.242 and 0.717 for oblong, setelan and wangky product types respectively.