THE BULLWHIP EFFECT
THE BULLWHIP EFFECT
Rest assured , once you ’ ve mashed up your S & Op plan and have secured all of your resources , it will be time to do it all over again , because the landscape never remains static .
The Wall Street Journal describes the bullwhip effect as : “ This phenomenon occurs when companies significantly cut or add inventories . Economists call it a bullwhip because even small increases in demand can cause a big snap in the need for parts and materials further down the supply chain .”
I , however , prefer Wikipedia ’ s description : “ The bullwhip effect is a distribution channel phenomenon in which demand forecasts yield supply chain inefficiencies . It refers to increasing swings in inventory in response to shifts in consumer demand as one moves further up the supply chain .”
Avoiding the costly downfalls of the bullwhip effect and maintaining efficiencies requires a highly responsive agile supply chain and a robust procurement and S & Op process . Without it , companies are left where many of them find themselves today , in reactive mode , spending their days putting out fires and piecing back a broken plan .
Which brings us to big data and data analytics .
65
“ THIS PHENOMENON OCCURS WHEN COMPANIES SIGNIFICANTLY CUT OR ADD INVENTORIES ”
— Timothy Aeppel , WSJ supplychaindigital . com