Demand forecast updating bullwhip

At first glance, the variabilities did not make sense.

demand forecast updating bullwhip-76

However, when they examined the orders from the reseller, they observed much bigger swings.

Also, to their surprise, they discovered that the orders from the printer division to the company’s integrated circuit division had even greater fluctuations.

However, as they examined the distributors’ orders, the executives were surprised by the degree of variability.

When they looked at P&G’s orders of materials to their suppliers, such as 3M, they discovered that the swings were even greater.

April 01, 1997 This is an MIT Sloan Management Review article.

Tremendous variability in orders along the supply chain can plague companies trying to eliminate excess inventory, forecast product demand, and simply make their supply chain more efficient.

In 1997, the phenomenon of bullwhip effect was popularized by Lee et al.

The bullwhip effect has quite negative impact on supply chain efficiency.

The authors suggest several ways in which companies can counteract the bullwhip effect. Companies can make demand data from downstream available upstream.

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