BULLWHIP EFFECT: how to reduce inventory and delays
The bullwip effect exercise allows participants to experience how changes in end-customer demand generate a demand that increases at each stage of the supply chain.
This is the so-called bullwhip effect, the main cause for waste due to stockpiling and overproduction.
Description and objectives
This exercise emulates a supply chain, from the reception of goods to the delivery of products to customers, and includes data reporting (delays, inventories, etc.), order delivery to suppliers (MRP) and desision-taking on future orders.
Throughout the two-phase game, the goal of each supply chain – comprising factory, wholesale distributor and retailer – is to reduce inventory build-up and delays.
During the first round of the exercise, the distortion and amplification in customer demand along the chain by the whip effect becomes apparent. While in the next round, and with the application of a pull system in which the amount of manufacture and supply is limited strictly to what the customer demands, it is showed how to control the ongoing ones – stock between workstations – without reducing the customer service rate.
This practice takes place during classroom training and improvement workshops.