3 Tricks to Fix the Bullwhip Effect and Smooth Inventory Replenishment

A Bullwhip Effect Creates Waves of Inventory Issues

Demand forecasting can eliminate a lot of your “wave riding” activities in supply chain planning. Your company invests significant resources, time and money, in planning and executing inventory replenishment and promotional events. You often experience service problems when your suppliers don’t have inventory in place to support your business. The suppliers operate their supply chain independent of yours and forecast demand from your purchase orders. This sales forecasting approach has a silo effect on information; your partners don’t get an accurate view of the end consumer’s demand. When suppliers see order quantities changing, up or down; how do they interpret the signal? Sometimes they view changes as trends or lumpy demand, and react by changing their production or inventory plans. This results in a wave of over-reaction called the “bullwhip effect.”
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