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Bullwhipeffect

Prof. Dr. P. Schönsleben Prof. M. Baertschi

Supply Chain World Europe 2002, 28-30 October, 2002, Amsterdam

What is the Bullwhip Effect caused by?
Study based on the Beer Distribution Game online

ZÜRICH

Jörg Nienhaus (email: Joerg.Nienhaus@ethz.ch) Swiss Federal Institute of Technology (ETH) Zürich Logistics and Information Management
©2002 by SCM Group

BWI

Prof. Dr. P. Schönsleben Prof. M. Baertschi

Agenda
Part I What is the Bullwhip Effect? What are reasons for the Effect? The Beer Distribution Game: Simulating a Supply Chain What is the Role of Human Behavior in the Bullwhip Effect? (Study based on the Beer Distribution Game online) How can Supply Chains cope with the Effect?
©2002 by SCM Group

Part II

Part III

ZÜRICH
BWI

Part IV

Prof. Dr. P. Schönsleben Prof. M. Baertschi

The Bullwhip Effect
Orders and Stocks in a Supply Chain OEM 1st Tier 2nd Tier 3rd Tier

ZÜRICH

Information (Orders) Material

BWI

©2002 by SCM Group

Prof. Dr. P. Schönsleben Prof. M. Baertschi

The Bullwhip Effect
Orders and Stocks in a Supply Chain OEM Observations: Variation of stocks and orders increases up the supply chain from customer to supplier. The longer lead times of information and material are, the stronger the effect is. Famous example: Demand for Pampers disposal diapers, analyzed and published by Procter&Gamble
©2002 by SCM Group

1st Tier

2nd Tier

3rd Tier

BWI

ZÜRICH

Prof. Dr. P. Schönsleben Prof. M. Baertschi

The Bullwhip Effect
Main Reason for the Effect: It is inherent in the System! Current Demand 1‘000 1‘200 Stock to meet Demand 1‘000 1‘000

Current Production Level 1‘000

BWI

Effect is caused by lead time: • If customer demand sinks, the supplier needs to empty its pipeline to avoid high capital costs. • If it raises, pipeline needs to be filled to avoid backlog.
©2002 by SCM Group

ZÜRICH

Prof. Dr. P. Schönsleben Prof. M. Baertschi
BWI

The Bullwhip Effect
Secondary...