BULLWHIP EFFECT

Tendency of consumers of a material or product in short supply to Buy More Than They need in the immediate future. Trend resulted in a series of effects that would disrupt the supply chain.

Ideally the supply from producers to consumers will go smoothly even though the number of stages. Suppose that the producers of finished goods manufactured after sent to the warehouse, then from the barn continued spread to the distributor, after the distributor then be distributed to retailers (retail), and the last to be received into the hands of the customer (buyer). New problems will occur when, for the sale of a reference period for the plan at a time when the future production. And in fact, demand from customers continues to change. The uncertainty of customer demand which is the major cause of bullwhip effect.

As a result of which will occur in the first place is an error in producing the quantity of goods. On the one hand, when excessive amounts of goods produced, then that will happen is the accumulation of goods. Every hoarding of goods will result in additional storage costs (storage) that this course will be a loss of its own costs. Not to mention if there is storage for goods that were damaged or defect. Vice versa, if the goods are produced too little, or less than customer needs, it will get lost opportunity loss selling goods to customers. If the products that we sell the type is unique and has no competitors maybe we can retain customers. But if the products we sell there are also other competitors that sell similar products, then there is the possibility of our customers will switch to another seller, which of course it is a form of its own losses, loss of customers.

Stacking of goods is one of the original case, and the last is the disappearance of customers, imagine if these two conditions occur simultaneously. What will happen is the chaos of the supply chain and business we have, the more goods will pile up and the buyers are not there. And the latter will happen is our business going bankrupt.
Caterpillar is a company that makes construction equipment worldwide. Caterpillar is readying Itself for growth as the economy is picking up and That the company is growing. Caterpillar is preparing itself for growth as the economy is taking and that the company is growing. Caterpillar is Preparing the rest of Their company for growth by creating a new program Within the company so the bullwhip effect that happens suppliers cans take loans out against the Their receivables with a favorable interest rate. Silkworm is preparing for the rest of their company for growth by creating a new program within the company so that the bullwhip effect in case of suppliers to take out loans against their receivables with interest rates favorable. They would be Able to get these loans within 5 days of delivering the parts to Caterpillar. They will be able to get the loan within 5 days of delivery of parts for Caterpillar. Would this help keep them, their suppliers in the business as it is not always available to get loans from banks in Their company starts growing once Because of the bullwhip effect. This will help them keep their suppliers in the business because it is not always available to get loans from banks after the company they started to grow because of bullwhip effect.

The main causes of the bullwhip effect
The main reason for the bullwhip effect resulting from eight aspects:
1. Revised demand. Different estimates of the supply chain for each forecasting model predicts the data used is limited to the direct command of downstream customers, the degree of master of a great future, often as a difference in the predictive value as amended to increase the number of orders, so the demand is increasing;
2. Price volatility. Supplier and distributors face the volatile, price promotions and bargains, short supply, inflation, natural disasters, etc., tend to increase the practice of inventory, so the order is much greater than the actual demand;
3. Order Quantity. Often used business strategy inventory greatest commandment, are summarized in the cycle or after a number of bulk orders to suppliers, so suppliers upstream to see the true demand;
4. Variation. Environment is due to policy and social change in the environment arising from the uncertainty caused by the order needs to amplified. Usually the most important means to cope with high inventory holding, and not the greater uncertainty, higher inventories, but this does not represent the real needs of high inventory;
5. Short game. When demand for some products on the market increases, retailers and distributors to suspect that the goods will be shortages, which causes them to expand the quantity order. But when the cooling demand or shortage after a number of large orders and suddenly disappeared, so that errors in demand forecasting and assessment, resulting bullwhip effect;
6. Imbalance traditional inventory. Marketing generally delivered by the supplier with a supplier of goods, stock still owned supplier of the responsibility, to be sold after the completion of the settlement, but the control product distributor. it cause general preference for vendors to increase the amount of stock control and order, so that increase the demand for order increase, resulting bullwhip effect;
7. Lack collaboration .Because the lack of information exchange and sharing, companies can not understand the real needs of downstream and upstream supply capacity, has more than storing their goods. Beside that, the supply chain can not be achieved on the stock items required and the allocation of transportation, just holding stock high, which can cause the bullwhip effect;
8. Lead. Change growth in demand with an increased lead time, and the longer lead time, orders for changes in demand for larger businesses because of uncertainty about the exact time of delivery, often want to leave some space for the delivery date, which holds a long time, so that step by step in front of the bullwhip effect also causes lengthwise.

information technology can eliminate the bullwhip effect
Overall, information technology is used to eliminate the bullwhip effect, such as in-house use of ERP and APS systems, supply chain management of inter-company SCM system used, the use of Internet / EDI technology, e-commerce, system integration information for achieve integration of various inter- corporate and business information data sharing, application of supply chain collaboration technology enables business supply chain upstream and downstream process integration between companies, working together to do business, can effectively eliminate the bullwhip effect.

For example:
1. SCM systems using joint forecasting, collaborative planning, forecasting and filling CPFR, VMI Vendor Managed Inventory and JIT inventory techniques II, can access real-time right to downstream demand information, order in a timely and accurate way to eliminate the projection and orders not standard mass, etc., causes the bullwhip effect;
2. Internet / EDI, e-commerce and enterprise application integration EAI technology, to achieve timely delivery of business information and business process sharing between upstream and downstream integration and close together, can effectively eliminate the charging rates, environmental variation and lack game, such as bullwhip effect is caused;
3. the use of supply chain collaboration, integration and technology distributors such as DI VIM to reduce the imbalance of supply and efforts to achieve the transfer of share inventory and transfers, so that they no longer need to hold high stocks, the use;
4. APS management system, the Party Logistics 3PL and 4PL logistics technology, through the optimization program and accuracy or to shorten the procurement outsourcing in advance, eliminating the bullwhip effect, and other. Thus, the elimination of bullwhip effect information technology has played an irreplaceable role.

However, every person who advanced system in accordance with the instructions to run, and every advanced technology is also a desire to serve, if not the strategy the right approach, only the advanced technology and systems, can not completely eliminate the bullwhip effect. Therefore, to eliminate bullwhip effect is the most important factor in the industry between upstream and downstream firms to build close partnership, trust only in the supply and demand, profit sharing and risk sharing basis, to open their own business data, share information and business process, and only in the company to achieve the premise of this partnership, the use of information technology and management information system to effectively cope with various factors, completely eliminate bullwhip effect.