Successful theory of the effect of inventory policy and supply chain structure on bullwhip effect?

Hi,

The overall idea about financial and general benefits of reducing inventories are greatly discribed in earler comments.

However, I wish to add few pointers here :

1. It is practically not possible to make NIL inventory wastage at few stages.

2. Introducing several strategic concepts as mentioned below may help to make it to nearest possible ZERO Inventory levels :

a. Transperant and Real time forecasting --- Only possible by very efficient IT tools (For Exm. ERP, WMS, Etc. )

b. JIT

c. Line Balancing and Continuous Prcess Re-Engineering for processing & Manufacutring levels

d. Efficient Logistics Planning -- Milk Run, Hub & Spoke, Etc Concepts

e. The effect of the product sales strategy --- Pull or Push type. The Pull type is easily achievable. Push type system needs better marketting and Channel support. IT can also enable the transperancy into the stock regster of the front end partments by connecting them into one network.

 f. The wheel again turns up to the step "a". This is a continuous process. The one which can maintain this effectively can win the race against the inventory issues.

Thanks.

 Bullwhip sometimes known as whiplash can be explained as an occurrence detected by the supply chain where orders sent to the manufacturer and supplier create larger variance then the sale to the end customer.This variance can interrupt the smoothness of the supply chain process as a link in the supply chain will over or underestimate the product demand resulting in exaggerated fluctuations.

what contributes to a bullwhip effect

1. disorganization
2. lack of communication
3. free return policies
4. order batching
5. price variation
6. demand information

Bull whip effect  happens when there is no Inventory control over the forecast . Bull whip effect is due to Forecast error , which should be validated by proper business justification on the HISTORIC movement of Inventory for existing items . Periodic monitoring of Inventory cycle can avoid  Inventory mismatch due to wrong forecast causing a Bull whip effect  ( in which sales are under pressure to achieve high Targets without any reference to the actual customers demand ) .

Inventory needs to be measured based of FSN . ABC analysis factors to avoid any big effects due to the bull whip escalation - forecast errors 

Bullwhip effect is the distortion which the manufacturers or partners face due to silo approach of inventory planning. A concept of supermarket can be used where there is uncertain demand. Now this uncertain demand cannot be mitigated with JIT. Even Toyota uses supermarket to mitigate the risks due to fluctuations in supply or demand