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Counteracting the bullwhip effect

24 February, 2015 - 17:30

To improve the responsiveness, accuracy, and efficiency of the supply chain, a number of actions must be taken to combat the bullwhip effect:

  • Make real-time end-item demand information available to all members of the supply chain. Information technologies such as electronic data interchange (EDI), bar codes, and scanning equipment can assist in providing all supply chain members with accurate and current demand information.
  • Eliminate order batching by driving down the costs of placing orders, by reducing setup costs to make an ordered item, and by locating supply chain members closer to one another to ease transportation restrictions.
  • Stabilize prices by replacing sales and discounts with consistent “every-day low prices” at the consumer stage and uniform wholesale pricing at upstream stages. Such actions remove price as a variable in determining order quantities.
  • Discourage gaming in rationing situations by using past sales records to determine the quantities that will be delivered to customers.