The bullwhip effect is a significant aspect in the area of supply chain management. The Bullwhip effect is a concept in which orders, given to suppliers are likely to have larger difference than the sales to purchaser. It is a distribution channel concept, in which estimations yield the inefficiencies in the supply chain system. In brief, it can be stated that it is a fundamental increase in the demand fluctuations through supply chain system. There are so many researches, which have discussed the bullwhip effect in the area of supply chain (Chiang, 2012). Till now, the researchers have not found a practical solution for resolving this. Though, the organizations are implementing various actions and strategies to reduce the impact of this phenomenon. P&G is one of those companies, which have taken some steps to decrease the bullwhip effect, which are stated below;
- P&G assumed that each and every employee required forecasting the demand in the supply chain system, as there is some undefined and unreliable data or information, which contributes to the surplus in its safety stock. This action in turn increases the cost of inventory.
- This organization provided its suppliers all the data about the Point-of-sale for developing 54an accurate plan.
- The customers and suppliers and Wal-Mart had been engaged in the process of Supplier Managed Inventory system that allowed them to look at the information regarding consumer demand relying on the Point-of-sale information.
- Procter & Gamble has been produced a consumer-driven supply network plan to establish a relationship between different processes of supply chain and actual sales of organization.
- The Managers are discussing the plan of demand on monthly basis, which will assist P&G in improving the future planning about the demands.
Moreover, there are some other methods and approaches, which are established by many scholars. The company can implement these approaches to decrease the influence of Bull whip effect. The approaches are listed below;
- According to Wilck & Joseph (n.d.), if there will better communication between an organization and its suppliers, then it will assist the organization in meeting the demands and orders of customers. Due to this, the company will not have various orders from different suppliers at a time.
- Adopting the scheduled ordering process can be an effective approach, which can be utilized decrease the impact of Bull whip effect.
- Furthermore, one more approach for reducing the impact of bullwhip effect is reducing the lead time between an organization and its suppliers. The lead time can be reduced by sharing the high level of data or information between the organization and its vendors (Wlick & Joseph, n.d).
In this aspect, Murray stated that the above-mentioned approaches rely on the high level of communication and coordination among supply chain partners that is not feasible and possible practically.
Question 2: Factors likely to have resulted in demand versus supply variance at Cisco
There are several factors, which are divided into two categories, i.e. external factors and internal factors. Both the categories were ignored or overlooked by Xilinx & Cisco, affecting the demand and supply differences. Both of the factors are stated below;
The major external factor behind this is a high decline in market in United States, which caused a decrease in the demand for electronic items and products.
- Differences caused an excess in the inventory in the inventory of Cisco and happened because of lack of data communication between Cisco and Xilinx. Xilinx is an organization, which produces the electronic constituents for Cisco.
- This organization is very much optimistic regarding the future of electronics sector, which directed it to the over production and the sector did not turn out to be like floating because it has forecasted it to become.
- In the case of high demand position, Cisco preferred to put the extra components as the emergency buffer. Due to this, there was an excess inventory with the drop in demands. Though, these additional components will improve the profits and revenues of the organization in the near future and this organization can improve the situation of suppliers indirectly.
Due to these variances concerns, Xilinx has taken some steps to handle these issues, which are listed below;
- It started to sell their products to the final consumer directly.
- Company is communicating through its on-line stores to enable its customers to shop the products from its website.
- Creating a channel of supply partners with planned jobs in the place of developing link and communication between distributors and consumers.
- With these processes, the organization has implemented a program, named as; Direct Fulfilment Program (Vendor Management Inventory).
|
Advantages |
Disadvantages |
Sources |
|
The organization used the VMI system under the name, i.e. Directs Fulfilment process. This system at Xilinx can allow this company to decrease its downstream network stock and its own inventory. This system will assist Xilinx to decrease the uncertainty in the demand. VMI approach is able to enhance the efficiency and effectiveness of multi-organization supply chain. This approach assists to reduce the level of inventory via decreasing the valleys and peaks of production. The transportation costs can be reduced, because this system permits the suppliers to categorize the resupplying process. The organization is interacting with suppliers via website, which will enable the high extent of information. It can enhance the flow of information among suppliers and producers. Implementation of web technology can assist the operations of supply chain in low-cost and fast manner. It will enable the organization and suppliers to organize a real time access to the inventory extent of organization. |
For getting the advantages of VMI system, higher extent of reliance is needed with the suppliers. It given higher responsibility to the suppliers to meet the requirements of company. Trust is an important factor that plays a significant role to apply through website and online store. The technology and software system will be needed, i.e. Electronic Data Interchange. |
(Henningsson &Linden; 2005). (Graham and Hardaker, 2000). (Grossman, 2004). (Ghani, Zainuddin and Ghani, 2009). |
3. Key order winner for Hewlett-Packard, Procter & Gamble and Xilinx.
The following table includes the key order winner for Procter & Gamble (P&G), Hewlett-Packard (HP) and Xilinx.
|
Company’s name |
A key order winner |
How the supply chain is created to assist the order winner |
Sources |
|
Procter & Gamble |
Efficient response from consumers |
The efficient response from customers for this organization places on the coordination and data or information, which is communicated on the supply chain system. The organization is created their system of supply chain by the use of 3M and VMI system. The customers can get the products of P&G in the stores regularly due to effective utilization of VMI through developing link suppliers and customers under the VMI. Moreover, P&G Company is using two applications, which are developed by HP. These applications will improve the efficiency of its suppliers to give response to the customers rapidly. The reason behind this that these two applications have extensive touch points of customers, suppliers, distributors and retailers through mobile apps and online invoicing facilities. |
(Kanning, 2005) (Barnes et al ,n.d) |
|
HP |
Reduction in the costs of inventory The order winner factor of HP assists it to be more effective and profitable via being cost effective. |
Several times, this organization had analysed its supply chain network from make-to-inventory to communicate the manufacturing structure to decrease the cost of inventory. For this analysis, the organization reduced its supply chain inventory time from 9 weeks to 2 weeks and 3 days. The critical force, which assists the organization to decrease the stock time and so, the cost is as it implemented the supply chain hub system that assists the organization to decrease 3 weeks. |
(Barnes et al, n.d) (Harbour, 2012) |
|
Xilinx |
Decrease in lead time |
Xilinx cut down the intermediate suppliers to reduce the lead time between consumers and their goods and started to create a direct link with the customers. Use of VMI system will give benefits to the company to reduce the lead time between their regular buyers and ordered products. By implementing this system, the company has decreased the lead time, which was an important component that helped the organization to get success in the electronic industry. |
Chou and Chou (n.d) |
References
Chiang, C.Y, 2012, An Econometric Investigation of the Bullwhip Effect—The Influence of Demand and Supply in the Automobile Industry, Biblio Bazar Publications.
Wlick & Joseph, n.d., Managing The Bullwhip Effect, Industrial Engineering and Operations Research, College of Engineering.
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