Bullwhip effect — Transcript
Full transcript
- 0:10What is the bulip effect?
- 0:13The ripple effect of small changes in
- 0:15customer demand are magnified upstream
- 0:17through a supply chain
- 0:20all the way from the customers to the
- 0:23retailer to the distributor to the
- 0:26manufacturer.
- 0:28though named because of the resemblance
- 0:30to a bullhip as the variability of
- 0:32demand increases sharply when you
- 0:34progress up the supply chain. For
- 0:35example, Jon has friends and family
- 0:38staying with him for a few months and
- 0:39buys more coffee than usual. Then the
- 0:42local supermarket sees the increase in
- 0:44demand for coffee and increases their
- 0:46order size with the wholesaler to refill
- 0:49buffer stock.
- 0:50Then the wholesaler sees the increase in
- 0:53order from the retailer and places a
- 0:55larger than normal order with the
- 0:56manufacturer for projected increase in
- 0:59demand.
- 1:00Then the manufacturer produces more
- 1:02coffee based on projected demand.
- 1:06The results: The manufacturer
- 1:08overproduces coffee. The wholesaler
- 1:11stockpiles extra coffee. The local store
- 1:14holds extra coffee and delays their next
- 1:16order. No more orders today. No thanks.
- 1:19We don't need any more orders.
- 1:24And thus, the manufacturer already has
- 1:26excess inventory and notices the reduced
- 1:28order, then scales back on production.
- 1:31Has this happened to you?
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