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For eliminating bullwhip effect in supply chains, transparency of demand is necessary but not sufficient.
Most supply chain professionals think that transparency of consumer demand across the value chain will eliminate the famous bullwhip effect. Various value chain players will give up the extra buffers they keep just in case… Companies have tried to partner with retailers to get the dynamic granular level demand data daily. Has it eliminated the bullwhip effect? Not really!
We have stronger evidence with some of the companies who have a substantial portion of their sales directly to consumers. They have all the consumer demand data they need, and it is authentic and timely. However, they continue to witness the bullwhip.
Transparency of demand is necessary but not sufficient to eliminate bullwhips. We also need trust in the value chain… not just between people but also trust in the process. People need to trust that supply chain processes will take care of supplies and ensure that there is no stockout during demand surges. If this trust in the process is lacking, people will continue to build extra buffers just in case…
Bullwhips can be eliminated only when we have both the necessary conditions… transparency of demand and trustworthy supply chain processes.