3 Tricks to Fix the Bullwhip Effect and Smooth Inventory Replenishment
A Bullwhip Effect Creates Waves of Inventory Issues
Demand forecasting can eliminate many 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 to support your business. The suppliers operate their supply chain independently 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 do 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 overreaction called the “bullwhip effect.”
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