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Demand Driven Supply Chains also experience bullwhip effect due to company’s policies and incentives.
As consumers, do we consume more on the last day of the month as compared to the first day of the next month? Do we use more soap or detergent? Do we consume more breads, fruits or vegetables? If not, why do the manufacturers of these items end up selling much more towards the month-end?
Some of this distortion is caused by the internal performance measurement systems of companies, such as employees’ goals linked to the forecast achievement, target achievement or monthly growth over the same month last year. Employees try to make up for their performance shortfall by pushing more stuff at the month-end.
The other significant reason is the incentives and schemes offered to channel partners. Discounts on bulk purchases, incentives on meeting the monthly purchase target result in channel partners ordering higher quantities towards the month-end in order to get their discounts or incentives.
If we truly want to eliminate bullwhip effect, we should relook at the policies, incentives and sales schemes along with DDSC implementation.