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Vol 30 - No 03 - May 2004 London & Southern: ‘Bullwhip’ and How to Prevent It On the 25th February Peter McCullen of Brighton University entertained us with a talk on the ‘Bullwhip effect’ at Brighton University. Did you know that: Demand fluctuations are amplified across the extended supply chain so that a small ripple in customer demand at retailers will cause dramatic changes in demand at a lower level in the supply chain, for example for the farmer? The phenomenon has been known for nearly 50 years as the ‘Forrester effect’ discovered in 1958 by Jay Forrester at MIT and published in his famous book on Industrial Dynamics in shortly after. The ‘Bullwhip’ effect (a term coined by Hau Lee of Stanford University for the Forrester effect) is responsible for many of the problems in supply chain management? In general, it is probably fair to claim, firstly that most businesses suffer from problems of lumpy and fluctuating demand patterns and, secondly, that most of these fluctuations are selfinflicted injuries resulting from extended supply chain process issues. The damage can therefore be greatly limited by using the right supply chain design. The bullwhip effect has gained prominence in more recent years since these days its damaging impact is more relevant in lean, low inventory businesses less willing to accept and manage unforeseen, unnecessary demand fluctuations. Peter, who knows his subject very well both, as an academic and as a past supply chain executive, gave an excellent description of the Bullwhip process, its definition and how it is caused. He demonstrated how the problem is inherent in feedback control systems where the system suffers from time delays (ie. lead times), causing systems fluctuations and potentially systems instability. A number of industrial examples illustrated the effect in numerical terms and showed the damaging impact. Peter quoted a case study in the industrial products field where the ‘Bullwhip effect’ has had a significant impact on business performance. The company concerned took a number of actions to improve their supply chain, in particular:   Slash lead times throughout the supply chain  Link factories to international customer demand by collaboration and better communications tools  Plan more frequently, ie. move from monthly MPS planning cycles to weekly planning cycles and, subsequently, to daily cycles The lead times for supply to customers were cut from 23 weeks to 2 weeks with corresponding huge inventory reductions and significant improvement in customer service. This was facilitated by Bullwhip attenuation leading to lower demand variance and corresponding reductions in safety stocks. Peter’s talk was concluded by a lively discussion on a range of supply chain strategy issues, well facilitated by Peter. This was an excellent event: a good and easily accessible venue, good food, an excellent talk and an appreciative audience of about 25 people. It would have been nice to have seen more IOM members there and readers might want to look out for future events in Brighton – it’s not hard to get to for most people in the South East and, if Peter’s talk sets the benchmark, well worth the effort! We were however, very pleased indeed, to see people from local companies including Parker Pen, Taurus Engineering and Electra. Günther Kruse, FIOM Page number: 6 Word count: 1000 Related Topics: Supply chain