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Bullwhip effect is quite prevalent in most supply chains.
Bullwhip effect can’t be just wished away, let’s be sensitive to it and look for it. Many companies feel that they have got over this problem by implementing techniques of Demand Driven Supply Chains. It is true that DDSC helps solve the problem of bullwhip effect by running the entire supply chain on a single version of truth, viz. actual market demand for your products.
However, it we look at it closely, it eliminates bullwhip in the internal supply chain only, starting from your direct customers and going back all the way to your vendors. It is indeed a great relief in reducing the bullwhip effect. However, it is necessary but not sufficient.
What about the supply chain from your customers to the end consumer? In CPG companies, it may have as many as three layers – distributor to wholesaler to retailer to consumer. Does it cause a bullwhip effect? In absence of granular consumption data, how do we ascertain its presence?
Will cover it in my next post…