The bullwhip effect in the supply chain can cause stock problems and additional costs as well as affect customer satisfaction. For instance, an excessive increase in production can lead to a lack of control in each of the logistical commitment processes in all the companies involved. This can be called bullwhip effect.
How the whip effect is triggered
The bullwhip effect is the tendency to an excessive fluctuation of inventories and orders in the supply chains that does not correspond with the actual demand of the customers. It is then that the small variations in a certain point of the chain are increasing and moving to all the procedures as the chain progresses, producing inventory problems in its wake.
If there is no constant information and feedback on the inventories and the current demand of the consumer in the different links in the supply chain, the whip effect generates over stock and, as a consequence, the final product is radically made more expensive.Such whipping in supply chain fluctuations increases the costs associated with inventory, transportation, shipping and receiving, etc
¿what factor cause the bullwhip effect?
- Lack of information between suppliers and intermediate buyers.
- Management without order in production orders.
- Lack of precision in the forecast of demand
- Making panic-driven orders in situations of stock breach
How to Avoid the Whip Effect ¿what factor cause the bullwhip effect?
- Get the supply chain to react to sales immediately.
- Planning in the warehouse management with a good forecast of the demand
- Understand the behavior of demand peaks and seasonality of products.
- Ability to integrate Just In Time dynamics to strengthen integration and synchronization with customers and suppliers.
In this way we will be able to adapt the client’s demands with the fluctuations of our supply chain in a correct and farsighted way.