What is the bullwhip effect, and how to avoid it in your business projects?
The phenomenon in which the different elements of a supply chain have demand variable fluctuations is called a bullwhip effect. Its name is derived from the bullwhip and a long-tailed whip used to control farm animals. When the whip is applied, the whip makes waves like shapes; hence the name bullwhip is derived. If reasons for the bullwhip effect are not taken care of would lead to drastic consequences to the complete supply chain. Management students often require project management assignment help while completing projects related to the bullwhip effect.
Reasons for bullwhip effect
The supply chain of any organization undergoes the bullwhip effect for the following reasons:
- Different members of the supply chain upgrade the forecast of the demand
- Constant customer demand fluctuations caused by the bullwhip effect toward different entities in a supply chain
- Retailers offering huge discounts on their products cause a bullwhip effect among different entities of a supply chain project.
- Over or under-delivery of products causes the bullwhip effect
- Incomplete information shared among different stakeholders
Negative effects of bullwhip
Due to the bullwhip effect, a business project faces the following issues:
- Due to overproduction, many products are decomposed as waste which causes huge losses to the business
- Underestimated customer demand would cause stock out and huge opportunity costs
- The relations between different stakeholders of the supply chain could be tarnished due to huge losses in the business
- Long backlogs of product orders lead to poor customer retention
How to avoid the bullwhip effect
Many organizations have solved the crisis of the bullwhip effect by using the following measures
- Complete information regarding customer demand and resource availability is shared between different stakeholders
- Using performance measuring methods, the performance of different stakeholders can be quantitatively analyzed
- Better customer forecast tools would avoid over and understock of goods
The operation manager of the organization needs to perform the following duties to ensure that there is avoidance of supply chain fluctuations such as the bullwhip effect:
- Taking proper updates and performance reports of different stakeholders
- Ensuring the latest technological equipment such as ERP systems for proper information access and distribution
- Using the demand-driven approach in a supply chain
- Effective management methods must be applied to ensure that the lead time for product manufacturing is as low as possible.
Students who take courses related to project management are required to analyze and write an essay related to case studies related to supply chain management. They often look for experts to Buy assignment from assignment writing experts.
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