Want to reduce the bullwhip? Measure it. Here’s how

Abstract

PurposeThe popular “beer game” illustrates the bullwhip effect where a small perturbation in downstream demand can create wild swings in upstream product flows. The purpose of this paper is to present a methodical framework to measure the bullwhip effect and evaluate its impact.Design/methodology/approachThis paper illustrates a framework using SKU-level data from an industry-leading manufacturer, its distributors, end-users and suppliers.FindingsFirms benefit from tracking multiple intra-firm bullwhips and from tracking bullwhips pertinent to specific products, specific suppliers and specific customers. The framework presented in this paper enables managers to pinpoint bullwhip sources and mitigate bullwhip effects.Research limitations/implicationsThis paper presents a framework for methodically measuring and tracking intra-firm and inter-firm bullwhips.Practical implicationsA disconnect exists between what is known and taught regarding the bullwhip effect and how it is actually tracked and managed in practice. This paper aims to reduce this gap. For the various products analyzed herein, the authors show how using this framework has the potential to reduce delivered product cost by 2 to 15 per cent.Social implicationsProperly managing the bullwhip leads to lower inventories and potentially lower product prices while simultaneously increasing firm profits.Originality/valueThis paper presents a novel approach to systematically tracking intra-firm bullwhips along with bullwhips specific to a given supplier or customer.