Supply chain is a vast network of companies that the raw materials from the suppliers are used to produce the final products and these products are moved to the retailers. The bull whip effect occurs then the demand for the products increase. Up the supply chain, it starts with the retailer, wholesaler, distributor, manufacturer and then the raw materials supplier.
This happens because of the demand forecast from the companies rather than the actual demand from the consumers and this effect is seen in the supply chains of the most of the industries.
Bull whip effect is caused due to retailers who wants to avoid the shortage of the popular items which leads to higher orders from the wholesalers and squeezes each company in the supply chain and creates decreases in inventory. And the other reason is that ordering too much inventory when there is no demand in the market, this creates overstock of inventory for each supply chain company. The operational causes for bullwhip effect is too much demand from the companies in the supply chain because of the communication gap the information regarding the market conditions is not passed up the supply chain. Companies planning and forecasting errors for the actual demand of the goods also causes the bullwhip effect in the supply chain.
This bull whip effect in the supply chain can be prevented by the implementation of the point of sale system (POS) with just in time (JIT) which allows each company in the supply chain to process information electronically regarding individual goods. Information available from the point of sale system consumer demand can be evaluated and this allows managers to order more goods if needed.
This happens because of the demand forecast from the companies rather than the actual demand from the consumers and this effect is seen in the supply chains of the most of the industries.
Bull whip effect is caused due to retailers who wants to avoid the shortage of the popular items which leads to higher orders from the wholesalers and squeezes each company in the supply chain and creates decreases in inventory. And the other reason is that ordering too much inventory when there is no demand in the market, this creates overstock of inventory for each supply chain company. The operational causes for bullwhip effect is too much demand from the companies in the supply chain because of the communication gap the information regarding the market conditions is not passed up the supply chain. Companies planning and forecasting errors for the actual demand of the goods also causes the bullwhip effect in the supply chain.
This bull whip effect in the supply chain can be prevented by the implementation of the point of sale system (POS) with just in time (JIT) which allows each company in the supply chain to process information electronically regarding individual goods. Information available from the point of sale system consumer demand can be evaluated and this allows managers to order more goods if needed.
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