supply chain dynamics – the bull whip effect
DESCRIPTION
Supply chains invariably demonstrate a demand-supply variability called the bull-whip effect - the effect increases in magnitude as we move farther away from the customer in the supply chain. Some of the causes and implications of the bull whip effect are discussed here.TRANSCRIPT
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July 31, 2009 1© Crafitti Consulting Private Ltd.
Supply Chain Dynamics –
The Bull Whip Effect
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Key issues in the supply chain
July 31, 2009 2© Crafitti Consulting Private Ltd.
Customer
Retailer
Wholesaler
Distributor
Factory
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Lead times - Inventory
July 31, 2009 3© Crafitti Consulting Private Ltd.
If your nearest department store
is 20 km away, you cannot go
there everyday.
Have to stock your weekly
supplies!
Lead times lead to inventory
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Lead Times – Loss of Flexibility
July 31, 2009 4© Crafitti Consulting Private Ltd.
Mid week if you get a
sudden unanticipated pang
for chocolate
Well, you just have to wait
till you finish what’s
already there!
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Customer demand changes
July 31, 2009 5© Crafitti Consulting Private Ltd.
Customer
Retailer
Wholesaler
Distributor
Factory
Changes in customer
demand
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Customer demand changes - induced
July 31, 2009 6© Crafitti Consulting Private Ltd.
Customer
Retailer
Wholesaler
Distributor
Factory
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Batch Processing
July 31, 2009 7© Crafitti Consulting Private Ltd.
Customer
Retailer
Wholesaler
Distributor
Factory
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Rationing Behavior
July 31, 2009 8© Crafitti Consulting Private Ltd.
Customer
Retailer
Wholesaler
Distributor
Factory
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Incentive obstacles
July 31, 2009 9© Crafitti Consulting Private Ltd.
Customer
Retailer
Wholesaler
Distributor
Factory
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Information distortion
July 31, 2009 10© Crafitti Consulting Private Ltd.
Customer
Retailer
Wholesaler
Distributor
Factory
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Delays and lead times
July 31, 2009 11© Crafitti Consulting Private Ltd.
Customer
Retailer
Wholesaler
Distributor
Factory
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Real Supply chains are much more complex!
July 31, 2009 12© Crafitti Consulting Private Ltd.
• Each player has a network of partners
• Each player may perform more than one role
• Relationships are multi-faceted and dynamic (pricing
strategies, procurement strategies etc.)
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LIST
(Lean Inventive Systems
Thinking)
Lean Thinking
(Value maximization, experimentation,
learning approach, elegance)
Inventive Thinking
(inventive triggers, laws of evolution, scenario building, focus on function)
Systems Thinking
(holistic approach, global optima, expanded and
connected system context)
Innovating complex real-life
Supply Chain Networks requires a
Lean Inventive Systems Thinking Approach!
July 31, 2009 13© Crafitti Consulting Private Ltd.