Abstract
Purpose: The purpose of the article is to report on research that was completed to explore the concept of the bullwhip effect in supply chains and to illustrate empirically the presence of the bullwhip effect in automotive supply chains in South Africa. Problem Investigated: This article investigates the presence of the bullwhip effect - which was identified through an empirical study - and its causes and implications for supply chain management in the South African automotive component industry. Methodology: A literature study was conducted on the causes and implications of the bullwhip effect phenomenon. This was followed by an empirical study in the form of a survey among South African automotive component manufacturers. Descriptive and inferential statistics were used to determine the significant supply chain problems relating to the bullwhip effect in automotive supply chains. Findings and Implications: The results indicate that automotive component manufacturers are dependent on demand-forecasting information from their customers. They experience long lead times, fluctuating orders, cancellation of orders, excess and slow moving inventory and a lack of integration with suppliers and customers. There are also signs of relationship problems and a possible silo mentality. The mentioned results indicate the presence of the bullwhip effect in South African automotive supply chains. Since the bullwhip effect can have a major impact on organisations' costs, knowing where to invest effort and resources should be a high priority for supply chain managers. Value of the Research: Since the field of supply chain management is extremely dynamic, this article contributes to the body of knowledge and provides new insight into the bullwhip effect phenomenon. The results included in this article could assist parties in automotive supply chains to focus their attention on problems that might be within their control and if solved could lead to improved competitiveness. Furthermore, there is little empirical research on this topic in the South African automotive component industry. Conclusion: It is possible that the bullwhip effect is responsible for inefficiencies in automotive supply chains. Knowledge of the indicators of the bullwhip effect can enable supply chain managers to identify it at an early stage and thus be proactive in preventing its costly influence on the efficiency of the supply chain. The bullwhip effect can be experienced by any industry. This is possibly the case in the automotive component industry in South Africa.
Highlights
The very nature of competition has changed
The mentioned results indicate the presence of the bullwhip effect in South African automotive supply chains
Since the bullwhip effect can have a major impact on organisations’ costs, knowing where to invest effort and resources should be a high priority for supply chain managers
Summary
The very nature of competition has changed. Companies no longer compete against companies. The bullwhip effect can drive 13 – 25% of operating costs. Chains consist of vertical structures (stages) with many different owners. Information is distorted as it moves across the supply chain because complete information is not shared between stages. This distortion is aggravated by the fact that supply chains today produce a large amount of product variability. The increased variety makes it difficult for Ford to coordinate information exchange with thousands of suppliers and dealers. The fundamental challenge nowadays is for supply chains to achieve coordination in spite of multiple ownership and increased product variety. The bullwhip effect is caused by a lack of coordination between organisations and their suppliers (Ravichandran 2008:88)
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