Bullwhip Effect and Supply Chain Risk Management

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Advanced Operations Management
Report
6/21/2018
Student Name

1 | P a g e
Question3 (A)
Bullwhip effect is a distribution network in which the supply chain management is done by
the organization. It refers to the increase or decrease in inventory due to changes in the
demand of the consumers. The supply chains of a company are affected by the consumer’s
demand, taste and preferences. It will affect the supply chain management of a company
(Plambeck, 2012).
Reasons
Demand forecasting updating
In this, the predictions of demand by the consumer are done by the logistics department. The
decision is taken that how much demand for a product is going to arise in the near future. To
fulfill that demand channel is decided in advance that will do the work of distribution
(Ciancimino, Cannella, Bruccoleri & Framinan, 2012).
Order Batching
Order batching is nothing but ordering the quantity of the product in frequent and small
batch. Ordering in small quantity creates the bullwhip effect and vice versa. The company
may order weekly or monthly. This creates the inconsistent demand for the supplier over time
(Cho & Lee, 2012).
Price Fluctuation
The distributor provides the discounts and coupons to their customers for the purpose of
increasing the sales and demand in the market. In such cases, the price fluctuations play an
important role which causes the customer to buy more than the required or to wait for a
favourable price before ordering or buying.

2 | P a g e
Suggestions
To decrease the effect of bullwhip effect in the organization proper supply chain management
is used. The company can use this suggestion which is as follows:
Collaborate with customers and suppliers
Collaborating with the customers and suppliers helped the company to predict their nature of
the purchase. This will make the company predict the supply chain opt by the company. They
can able to build the advancements and seasonality into the prediction and then provide more
vision and view to their providers to help avoid the build-up of needless stock due to the
bullwhip effect (Carvalho, Barroso, Machado, Azevedo & Cruz-Machado, 2012).
Improve forecast accuracy
Even if the company is demand driven then also the work of demand forecasting is done by
the company irrespective of its nature and size of the business. This will make the company
calculate the demand required in the market and by its customer. Ensuring the right demand
from it customers reduces the effect of bullwhip in the business and management of supply
chain can be done with effectiveness.
Enable fast decisions with visibility and insight
The most significance of the supply chain management lies in the visibility of the application
in the business. They are able to provide the insight into the business. Without making the
right insights in the business, the supply of chain cannot be measured. If the proper and fast
decisions are made then it results in the low cost, consistent inventory and frequent deliveries
(Chen & Lee, 2012).
Adopt a demand-driven supply chain management approach
Adopting the demand-driven supply chain management approach is found to be the greatest
active ways to decrease the bullwhip effect in the business. It is a known fact that most
demands forecasting are done inaccurately in the business which will increase the bullwhip