THE BULLWHIP EFFECT
We are group 2 with the India CAP and our client is an A/C manufacturer within the automobile industry. Our group includes Tanya Taylor (our group leader), Graham Hollander (data expert), Rosa Padilla (logistics), and Patrick Legendre (tech). It has been an interesting three weeks full of meetings, classes and special guests that have been helping us better understand the problem and define the scope of our project. We will are giving a weekly update of our progress both while we are on the George Washington University campus and while we are in country in New Delhi, India. Here is a recap of our first week:
Another day waking up EARLY to attend a video conference call with our client at 7:30 am. This is usual, when your client has a different time zone.
After talking to our client we found out that we are on the right track with some of the recommendations we are working on, specifically with some add-ons for the software that could help them reduce the variability on their foreign exchange forecasts.
Now we are pumped and ready for class to present our literature review. Class begins and there is a change of plan. Since all the projects are related to supply chain management Prof. Kanungo had a brilliant idea to show us a game that will help us better understand inventory management, specifically the bullwhip effect. The activity is called The Beer Game (no alcohol involved though… it’s 9 am!!!).
The objective of the game is to meet customer demand for cases of beer through the distribution side of a multi-stage supply chain with minimal expenditure on back orders and excess inventory. There are four stakeholders within the supply chain: manufacturer, distributor, wholesaler, retailer, with a two week communication gap of orders toward the upstream and a two week supply chain delay of production downstream.
Our group is playing the role of wholesaler. You can see how each one of the teams was paying full attention to the instructions:
At the beginning of the game we managed to implement a just in time inventory management…. So we were happy….
But after the 4th order arrival… we started to have stock outs! Our distributors were not giving us enough beer cases and could not satisfy our customers’ orders! But it turned out that ALL OF THE TEAMS were facing this issue!
After the game ended, we could see how our “planning” was not aligned with the consumer demand. After giving Prof. Kanungo our purchase orders, he made a graph that showed how inaccurate our inventory management was. The graph showed the so-called “bullwhip effect” and it looked something like this:
We understood in a simple way what issues companies when they don’t have a constant information flow from suppliers and their vendors. This helped us better understand the issues that our clients are facing and is what we plan to keep in mind when contemplating solutions for our client.
Post written by Rosa Padilla