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Supply Requirement (Key issues in supply chain (Configuration of…
Supply Requirement
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Bullwhip effect
Definition
Bullwhip effect as an occurrence detected by the supply chain where orders sent to the manufacturer and supplier create larger variance then the sales to the end customer. These irregular orders in the lower part of the supply chain develop more distinct higher up in the supply chain.
Good or Bad???
Bullwhip effect is not so good in logistics. It can cause disorganization. This is due to order larger or smaller amounts of a product than is needed due to an over or under reaction to the supply chain beforehand between each supply chain. Other than that, lack of communication between each link in the supply chain that make it difficult processes to run smoothly. Managers can perceive a product demand quite differently within different links of the supply chain and therefore order different quantities. Lastly, the demand information which is relying on past demand information to estimate current demand information of a product does not take into account any fluctuations that may occur in demand over a period of time.