Reference no: EM132397451

SCLT 6318 - Supply Chain Strategies University of Houston USA

Quantifying the Bullwhip Effects Exercise

1. Mr. Ned Stark, the inventory manger of a durable goods retailer, observes that the fluctuation in the retailer's incoming order quantities appears to be higher than the fluctuation in its customer's order quantities. The manager suspects that his company is experiencing the prevalent Bullwhip effect. In order to numerically show the impact of the potential Bullwhip effect, he begins to collect data he considers important for the calculation. After reviewing the freight data, Mr. Stark found the average lead time for replenishments is 5 days. The retailer uses 6-period moving average method to review and forecast demand.

How can Ned Stark quantify the retailer's Bullwhip effect?

Equation to be considered:

(Var(Q)/Var(D)) ≥ 1 + (2L/p) + (2L²/p²)

2. Ned Stark's conjecture is that the Bullwhip effect has been passed upstream in his company's supply chain. Currently, there is no collaborative effort among his supply chain members. Given the substantial bargaining power of his company, Mr. Stark intends to propose to his supply chain partners to regular share sales forecast to better coordinate the durable goods supply chain.

The replenishment lead time from the wholesaler to Mr. Stark's company is 5 days. The lead time from the manufacturer to the wholesaler is 10 days. The lead time from the overseas supplier to the manufacturer is 15 days. As of now, all supply chain members use 6-period moving average to evaluate and forecast demands. Assess the Bullwhip effects displayed in the current supply chain context. If Ned Stark successfully convinces its supply chain partners to share sales and forecast information, will the supply chain be able to eliminate the Bullwhip effect? Explain why.

Equations to be considered:

(Var(Q^k)/Var(D)) ≥ 1 + ((2Σ^k_i=1 L_i)/p) + ((2Σ^k_i=1 L_i)²/p²)

(Var(Q^k)/Var(D)) ≥ ∏^k _i=1 (1 + (2L_i/p) + (2L_i²/p²))