Bull Whip Effect

The Bullwhip Effect

Can be explained 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 to be more distinct higher up in the supply chain. This variance can interrupt the smoothness of the supply chain process as each link in the supply chain will over or underestimate the product demand resulting in exaggerated fluctuations.

What contributes to the bullwhip effect?

Disorganization Lack of communication

Free return policies

Order batching Price variations Demand information

Role Of IT in SCM
Effective use of information technology Maximizes the advantages and minimizes the risks inherent in LTL transportation.

Each package must be positively identified every time it is handled. Information about every destination must be checked and double checked to maximize cargo speed while minimizing empty trailer miles

Cont
Implementation of competitive information technologies Begins wherever carriers feel they need the most assistance. For many, dock management represents a logical starting point. Positive tracking of every package in and out of every hub drastically reduces the possibility of cargo delays and damage. Automatic optimisation techniques simultaneously reduce handling expenses and allow some trailers to bypass consolidation hubs entirely.

Supply Chain Performance Measures

Supply chain performance measures can be classified broadly into two categories: Qualitative measures (such as customer satisfaction and product quality) Quantitative measures (such as order-todelivery lead time, supply chain response time, flexibility, resource utilization, delivery performance, etc.).

Cont
Quantitative metrics of supply chain performance can be classified into two broad categories: Non-financial and financial. Non-Financial Performance Measures Cycle time Customer Service Level Inventory Levels Resource utilization Financial Measures

Financial Measures
Cost of raw material Revenue from goods sold Activity-based costs such as material handling, manufacturing, assembling, etc. Inventory holding costs Transportation costs Cost of expired perishable goods Penalties for incorrectly filled or late orders delivered to customers

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Credits for incorrectly filled or late deliveries from suppliers Cost of goods returned by customers

Credits for goods returned to suppliers

Typically, the financial performance indices can be put together using the following major modules: activity based costing, inventory costing, transportation costing, and intercompany financial transactions.