Understanding the causes of "bullwhip effect" can help managers to formulate effective strategies to reduce its impact. In different industries, some innovative enterprises find that they can control the bullwhip effect by sharing information with suppliers in the supply chain, coordinating with each other and adjusting plans. How do these companies eliminate the causes of the "bullwhip" effect?
1. Avoid using multiple methods to update demand forecast.
One way to avoid repeated processing of related data in supply chain is to enable upstream enterprises to obtain the demand information of their downstream enterprises. In this way, both upstream and downstream enterprises can update their forecasts based on the same original data. For example, computer manufacturers will ask distributors to feedback the products in the central warehouse of retailers. Although these data are not as comprehensive as the data of retailers' point of sale, they are much better than the information of lost goods after being sent out. Now, companies like IBM, Hewlett-Packard and Apple will require their retailers to feed back data in their contracts.
Partners in the supply chain can use Electronic Data Interchange (EDI) for forecasting. Because of the different forecasting methods and purchasing habits, when they place orders with upstream enterprises, they will still cause some unnecessary fluctuations in the orders. Using electronic exchange system can make upstream enterprises know the demand and inventory information of downstream enterprises, and resupply downstream enterprises. Accordingly, downstream enterprises become active members of the supply chain.
Another method is to bypass downstream enterprises to obtain relevant information. For example, Dell computer bypasses the traditional distribution channels and sells its computers directly to consumers, so that Dell can directly understand the demand pattern of its products. Finally, as mentioned earlier, too long supply time will also exaggerate the "bullwhip" effect. Therefore, improving operation efficiency can greatly reduce the range of demand changes caused by updating various forecast data.
2. Break bulk orders
Due to the bullwhip effect of bulk ordering, enterprises should adjust the ordering strategy and implement the procurement or supply mode of small batch and multiple orders. The reason why enterprises prefer to purchase in large quantities with low frequency is because of the high purchase cost and transportation cost. In fact, even though EDI can greatly reduce the cost of ordering food, the efficiency of ordering food will still be limited by dissatisfaction. Nowadays, many manufacturers encourage their distributors to order many different products at the same time. In this way, trucks can load multiple products from the same manufacturer at a time, not the same variety. In this way, for each product, the ordering frequency increases and the sending frequency remains the same, but the scale economy of transportation can still be obtained. For example, Procter & Gamble offers discounts to customers who are willing to mix orders.
The use of third-party logistics companies can also achieve economies of scale for small orders. Enterprises can realize economies of scale by jointly transporting goods near suppliers without ordering in large quantities from the same supplier at one time. Although this will increase additional handling and management costs, combined transportation is still worthwhile as long as the savings outweigh the additional costs.
Stabilize prices
The best way to control the "bullwhip" effect caused by early purchase or conversion is to reduce the frequency and scope of discounts to wholesalers. Manufacturers can reduce the incentive to buy in advance by formulating a stable price strategy. When enterprises promote regional sales, some retailers will make large purchases in this region and then transfer these products to other regions. Activity-based costing system can accurately calculate the cost of inventory, special handling and transportation, so it can help enterprises to implement the price strategy of low price every day.
4. Eliminate the game behavior under shortage.
In the face of insufficient supply, suppliers can limit the supply according to the customer's previous sales records, not according to the order quantity, so as to prevent customers from exaggerating the order quantity in order to obtain more supply. General Motors has done this for a long time, and now many big companies, such as Hewlett-Packard, have begun to adopt this method.
When demand exceeds supply, customers lack understanding of the supply situation of manufacturers, and it is easy to have game behavior. Information about customers' production capacity and inventory status can alleviate customers' worries and thus reduce their participation in the game. However, * * * enjoying this information does not completely solve the problem. Some manufacturers will help customers place orders before the peak season, which can better design the production capacity, arrange the production schedule and meet the demand of products. In addition, the return policy of manufacturers to retailers will also encourage gambling. If there is no punishment, retailers will constantly exaggerate their demand and return or cancel orders when there is an oversupply.
Countermeasures to solve the "bullwhip effect"
The fundamental countermeasure to solve the "bullwhip effect" is to integrate the relationship between enterprises in the chain, establish the credit mechanism between enterprises and realize information sharing. Information sharing means that all enterprises in the supply chain have some knowledge or actions, such as production, sales, demand and other information. Realizing information sharing can reduce the risks caused by asymmetric or incomplete information. We hope to establish an Internet-based information sharing system to realize information sharing management, coordinate the actions of enterprises, and ensure the real and rapid transmission of demand information, thus reducing the "bullwhip effect" in the supply chain.
1, shorten the lead time
Generally speaking, the shorter the lead time, the more accurate the order quantity, so encouraging shortening the lead time is a good way to solve the "bullwhip effect".
According to Wal-Mart's survey, if the goods are purchased 26 weeks in advance, the demand forecast error is 40%, if the goods are purchased 16 weeks in advance, the demand forecast error is 20%, and if the goods are purchased at the beginning of the sales season, the demand forecast error is 10%. Through the application of modern information system, sales information and cargo flow can be obtained in time, and at the same time, real-time demand ordering can be realized through multi-frequency and small-batch joint distribution, further reducing the error of demand forecasting.
The use of outsourcing services, such as third-party logistics, can also shorten the delivery time, so that small orders can be operated on a large scale, so that sellers do not have to order a large number from the same supplier at one time. Although this will increase the extra processing cost and management cost, as long as the cost saved is greater than the extra cost, this method is still worth applying.
2. Game behavior avoidance in the case of shortage
First of all, when there is a shortage, suppliers can inquire about the past sales of downstream enterprises through the Internet as the basis for distributing goods to them, rather than according to the quantity ordered, so as to prevent downstream enterprises from trying to get more distribution by exaggerating the order quantity. Hewlett-Packard Company adopts this method. Secondly, through the internet, all enterprises in the chain can enjoy information such as production capacity, inventory level and delivery plan, which increases transparency, thus alleviating the panic of downstream enterprises and reducing game behavior. Manufacturers can also learn more accurate demand information and arrange production reasonably and orderly.
3. Strengthen storage management and share the inventory responsibility reasonably.
One way to avoid artificially processing the relevant data in the supply chain is to enable upstream enterprises to obtain the real demand information of their downstream enterprises, so that both upstream and downstream enterprises can make supply and demand plans based on the same original data. For example, IBM, Hewlett-Packard, Apple and other companies explicitly require dealers to feedback the products in the central warehouse of retailers. Although these data are not as comprehensive as those of retailers' point of sale, they are better than the information of lost goods after being sent out.
Using modern information technology such as electronic data interchange (EDI) is also an important way to solve the "bullwhip effect". For example, Dell has formed an efficient information network through Internet/Intranet, telephone and fax, which can be transmitted to Dell Information Center when the order is generated, and the information center will decompose the order into subtasks. It is distributed to regional centers through the Internet and inter-enterprise information networks, assembled according to Dell electronic orders, and delivered on time (usually no more than 48 hours) according to the schedule, so that ordering, manufacturing and supply can be completed in one stop, effectively preventing the bullwhip effect.
Joint inventory management strategy is an advanced method to share inventory responsibility reasonably and prevent demand variation and amplification. Joint inventory management is a risk-sharing inventory management model, which balances the rights and responsibilities of suppliers and sellers. It establishes a reasonable sharing mechanism of inventory cost, transportation cost and competitive inventory loss between suppliers and sellers, and transforms all the responsibilities of suppliers into part of the responsibilities of sellers, so that both parties can bear the costs and risks and enjoy the benefits, which is conducive to the formation of a balance mechanism of costs, risks and benefits, thus effectively restraining the occurrence and occurrence of "bullwhip effect".
4. Strengthen the communication between enterprises and consumers, and establish new customer relationships.
Through the Internet, enterprises and customers can communicate with each other, which shortens the distance between enterprises and customers and facilitates enterprises to understand customers' needs and trends, so the demand forecast made by enterprises has high accuracy. Moreover, upstream enterprises can also exchange information with customers and evaluate the order demand of downstream enterprises, effectively alleviating the "bullwhip effect".
At the same time, manufacturers can also establish a direct selling system through the Internet, reduce the levels in the supply chain, simplify the supply chain structure, prevent information from being artificially distorted in the transmission process, and avoid the "bullwhip effect". For example, Dell has formed an efficient information network through the Internet, telephone and fax. Customers can directly place orders for assembly and supply to the company, so that ordering, manufacturing and supply can be completed through one train, and the direct transaction between suppliers and customers can be realized, effectively preventing the "bullwhip effect".
To sum up, it is quite difficult for most enterprises to survive and develop in the fierce market competition on their own. Enterprises are interconnected through the supply chain, participate in the competition as an organic whole, cooperate with each other, complement each other's advantages, and achieve synergy, thus improving the competitiveness of the supply chain and realizing the survival of the group. The supply chain involves not only the distribution of cakes, but also making cakes bigger and discovering new cakes, which requires mutual trust and mutual benefit. Therefore, enterprises should establish a credit mechanism to realize information sharing, so that all node enterprises can make decisions from the overall optimal perspective, realize the continuous value-added of the supply chain, and all enterprises can also make profits and seek survival and development.