Lecture 10 - The Forrester Bullwhip effect

Question 1

What is the Forrester Bullwhip effect?

Answer 1

The bullwhip effect is defined as the demand distortion that travels upstream in the supply chain from the retailer through to the wholesaler and manufacturer due to the variance of orders which may be larger than that of sales.

Question 2

Where does the bullwhip strike the hardest?

Answer 2

Factory - are very cost sensitive since they have invested in a special number of capacity

Question 3

What causes the Forrester effects?

Answer 3

Changes in Price - lower price –> Buy more than we need –> We order less in the next period = >Forward buying

Question 4

What is meant by SCM and what is the overall 4 elements?

Answer 4

SCM = Supply Chain Management

1) operational improvements
2) exchange of information
3) supply chain alignment
4) supply chain redesign

Question 5

In terms of SCM, what is meant by Operational Improvements?

Answer 5

– reduction of lead times
– every day low price (EDLP)
– make delivery appointments

Question 6

In terms of SCM, what is meant by exchange of information?

Answer 6

– use point-of-sale data (POS)
– electronic data interchange (EDI)
– internet ordering
– sharing sales, capacity and inventory data
– transparency of “available to promise”
– supply chain planning & synchronization

Question 7

In terms of SCM, what is meant by supply chain alignment?

Answer 7

– blanket orders
– JIT-relationships
– family contracts, capacity purchase
– ECR: efficient consumer response
– allocation based on past sales
– VMI: inventory control in distribution centers or at the customer
– CPFR: Collaborative planning, forecasting and replenishment

Question 8

In terms of SCM, what is meant by supply chain redesign?

Answer 8

– “consumer direct”
– design for local product adaptation
– postponed manufacturing
– design for logistics
– changes in transportation: mixed-SKU truckloads, cross-docking
– outsourcing of logistics