Whiplash effect in real firms. Increased demand (Forrester effect, whip effect). Convenient, clear and visual handout, easy to understand. And how convenient it is to teach buyers and sellers that communication, and not your own instinct, can

Beer game described by Peter Senge in The Fifth Discipline. On the example of beer supplies, a distribution chain is modeled with four stages of supply: retailer, wholesaler, distributor and manufacturer. For each seller plays one, and preferably two or three players. Thus, the entire supply chain is usually played by 8-12 players. The master can control several circuits in one class at the same time. It is possible to record the results of each move manually in a special table, or you can use the online resource with the game.

A task

The task of the supply chain is to produce and deliver beer to the end consumer: the factory produces, and the other three links in the supply chain move the beer until it reaches the end consumer at the end of the supply chain.

The goal of the players is simple: each link must properly fulfill the incoming orders for beer.

Structure

Orders flow up to the manufacturer, while supplies flow down the supply chain to the retail customer (see Figure 1).

An important element of the game is the time delay for the execution of the order, which consists of the time for delivery and for the production of goods. Each delivery (and production order) requires two rounds until they are finally delivered to the next link (see figure 2).

Let's play

The game is played in rounds that simulate weeks.

Using the materials (see Figure 2), players must complete the following steps in each round:

take orders from their customers;
receive goods from your supplier;
update the game table;
send the goods to your customer further down the chain;
place a new order with your supplier.

The choice of order quantity in each round is the only solution, which players take during the game.

Rules

Each order must be completed right now (level inventory players must be large enough), or later in subsequent rounds.

Stocks in stock and overdue (backorders) incur costs – each item in stock costs EUR 0.5 per week, while each overdue item costs EUR 1.00. Therefore, the main goal of every seller is to keep their costs as low as possible.

Thus, the players' optimal strategy is to run their business with the lowest possible inventory (minimum orders to their suppliers), while avoiding non-fulfillment of orders from their customers.

Players are not allowed to communicate. The only information they are allowed to exchange is the order quantity; there is no transparency as to what stock levels or actual consumer demand is; only the retailer knows the external demand.

consumer demand

External demand is predetermined and usually does not vary significantly. At the start of the game, the supply chain starts up with the same inventory levels (eg 15 units), order volumes (eg 5 units) and some amount of beer in transit and in production (eg 5 units).

To induce a whip effect, external demand first remains stable for several rounds (eg 5 units for 5 rounds). Then it suddenly increases (a jump of 9 units), then it stabilizes again at this higher level until the end of the game (usually only 52 rounds in the number of weeks in a year, one round lasts less than one minute).

Just one sharp increase in external demand inevitably creates a whip effect and destabilizes the placement and fulfillment of orders throughout the supply chain.

Bullwhip effect is a well-known consequence of coordination problems in traditional supply chains. It is expressed in the fact that even with small variations in demand in retail, the level of fluctuation in orders tends to increase significantly downstream in the supply chain. As a result, the total order becomes very volatile [with steady demand], and can be very high this week and almost zero next. The term was coined around 1990 when Procter & Gamble sensed misordering fluctuations in their baby diaper supply chain. The bullwhip effect is a well-known consequence of coordination problems in traditional supply chains. It is expressed in the fact that even with small variations in demand in retail, the level of fluctuation in orders tends to increase significantly downstream in the supply chain. As a result, the total order becomes very volatile [with steady demand], and can be very high this week and almost zero next. The term was introduced around 1990 when Procter & Gamble sensed a misguided order fluctuation in their baby diaper supply chain. As a consequence of the whip effect, there are problems throughout the supply chain:

high (safe) stock levels;
poor customer service;
poor utilization of capacity;
deepening the problem of demand forecasting;
high prices and low levels of trust within the supply chain.

While the bullwhip effect is not new, it is still a relevant and pressing issue in modern supply chains.

Typical Results

In order to learn from Beergame, it is necessary to collect and study the data received by the players. Here are the typical results of one game.

Figure 1 shows the distribution of orders over 40 weeks and a typical bullwhip effect. It becomes clear that retailers were reacting to the surge in consumer demand with a two-week time delay.

In the next phase, everyone placed larger orders, each one getting bigger, thus creating the typical bullwhip effect.

Inventory fluctuation

Figure 2 shows stock fluctuations with negative stock indicating a delayed order.

Obviously, the players are faced with a delay in orders. Over-reacting to demand led to rapid overstocking at 20-30 weeks.

Summing up the game

The debriefing usually begins with a brief discussion of the students' experiences throughout the game. As a rule, the following questions are discussed:

Have you ever felt like you weren't in control of the situation?
Have you blamed your chain partners for your problems?
Have you felt despair at some point?

This discussion usually shows that people really blame their supply chain partners for not doing their job right (either making unreasonable orders or failing to deliver your order).

Desperation and disappointment are common feelings during the last round of the game.

Structure creates behavior

The main takeaway from this discussion is that the structure of the game (i.e., the structure of the supply chain itself) dictates behavior.

Thinking about the game

The second group of questions can be devoted to discussing how Beergame simulates real conditions:

What is unrealistic in this game?
Why are there order delays?
Why are there production delays and delivery delays?
Why do we need distributors and wholesalers? Why can't retail beer be shipped directly from the factory?
Should a beer producer interact with its raw material supplier?

Please pay attention! By highlighting the fact that real supply chains are much more complex (there is a huge variety of products and supply chain partners, as well as complex cross-links), students can quickly see that real conditions favor the whip to a much greater extent, and that the Beer Game really good tool for simulating the whip effect.

The discussion of the results

Usually this discussion leads to a very lively discussion. For example, the concept of “accumulated supply chain costs” is introduced, indicating that until the product reaches the final customer, no one in the supply chain will earn; this understanding is the first step in creating the idea of global thinking and optimization of the entire chain, which essentially require cooperation.

Then you can move on to identifying the causes of the whip effect.

Reasons for the whip effect

The bullwhip effect is mainly driven by three basic problems: 1) lack of information, 2) supply chain structure, and 3) lack of collaboration.

Three reasons can be identified in an interactive session with students discussing the Beergame experience and then validated with practice and literature references.

1. Lack of information

In the Beer Game, no information is stored, except for the size of the order. Consequently, much information about consumer demand is quickly lost on the way upstream in the supply chain.

This feature of Beergame models supply chains with low levels of trust, where the parties share only a minimum of information among themselves. Without actual customer demand data, all forecasting must rely solely on incoming orders at every stage of the supply chain. In such a situation, traditional forecasting methods and stock-holding strategies tend to create a bullwhip effect.

2. Structure of the supply chain

The very structure of the supply chain contributes to the whip effect. We have long time order fulfillment, i.e. it takes a long time for an order to arrive upstream and the next shipment to go downstream. The more time it takes, the more likely a whiplash effect will occur.

Usually, when placing an order, they are guided by the forecasted demand during the replenishment of the order, adjusted for safety stock, in order to guarantee the level of service (no shortage of goods) during the time until the next order arrives.

Therefore, the longer the replenishment time, the more explicitly the order volume will respond to an increase in forecast demand (especially in combination with the need to update the safety stock level, see above), which contributes to the bullwhip effect.

3. Local optimization

Local optimization, expressed in local forecasting and local cost optimization in the absence of cooperation in the supply chain, also underlies the whip effect.

Lots to order are a good example of local optimization. In practice, the size of the order is fixed and determined by the method of delivery, since, for example, the cost of delivery for delivery by a full truck or container is lower than for delivery of a smaller volume. In addition, many suppliers offer volume discounts to encourage large orders.

Therefore, there is some incentive for individual players to take on more (and thus delay some of the orders) from their customers and place only large aggregate orders with their supplier. This behavior, however, worsens the problem of demand forecasting, because each such order contains very little information about real demand. And delivering orders in batches, of course, does contribute to the bullwhip effect by inflating orders unnecessarily.

Tatyana Meshchankina, Logistics Manager, Chemexpert CJSC

In search of more and more sophisticated forecasting techniques, specialists often lose sight of the fact that such undesirable demand fluctuations can be not only natural, but also artificial, and therefore can be corrected.
AT traditional systems production and logistics management, all enterprises are considered as isolated elements, independently planning their needs and purchases. In this case, there are significant deviations and fluctuations in the entire supply chain. Local optimization, inconsistency of actions of participants in the supply chain and insufficient information exchange lead to the so-called Bullwhip effect.

This effect is a situation in which minor changes end-user demand lead to significant deviations in the plans of other participants in the supply chain (subcontractors, suppliers, etc.). When the Bullwhip effect occurs, the uninterrupted movement of material and information flows in the logistics chain is disrupted, thereby causing the risk of non-fulfillment of the customer's order.

IN SEARCH OF EFFECT

Procter & Gamble once wondered why the company's orders for one of its best-selling products, baby diapers, were skyrocketing. After all, their consumption by the end client, that is, the baby, is uniform and constant. Consistently studying the statistics: 1) sales retail stores 2) orders received by distributors, 3) orders received by the company from distributors, and finally 4) orders placed by P&G with a supplier of raw materials, company managers were surprised to find that fluctuations in order volume increase as they move up the supply chain . This phenomenon has been called the bullwhip effect.

REASONS FOR THE WHIP EFFECT

It was hypothesized that this effect is due to irrational decision-making on replenishment and stock formation. That is, faced with a sharp surge in incoming orders, managers tend to play it safe and, in turn, place such an order that it will allow to satisfy the increased demand with some margin. When such an inflated order arrives (of course, after some time), the surge in interest in the product, as a rule, has already given way to a recession, and an excess of goods is formed in the warehouse. Consequently, the next order will either be delayed until the stock is used up, or significantly reduced in volume. The supplier of the product, receiving such uneven orders, in turn makes forecasts with even greater scatter of values and puzzles his supplier of components with even larger jumps. However, a closer look at the problem showed that the matter is not only in the behavioral characteristics of those responsible for determining the need. The Bullwhip effect has a series objective reasons, among which are:
errors in demand forecasting;
creation by enterprises of additional insurance stocks;
arbitrary increase in the size of batches of deliveries;
price fluctuations; delays in obtaining the necessary information about needs; deviations from the planned dates and volumes of production and supplies.

GROWING PREDICTION ERROR

Each company forms a plan of its orders based on forecasting the demand of its customers. As a rule, the forecast is based on the data of the past period. At the same time, statistical methods of data processing extrapolate the data of uptrends and downtrends a little further, beyond the real limiting points of ups and downs in demand. Given this error, both upward and downward, the company forms its orders to the supplier. At the same time, it also proceeds from the level of its current stocks, subtracting or adding the volume that was overestimated or underreceived in the previous order. Accordingly, the supplier, analyzing the time series of the company's orders, predicts his needs with an even greater spread (Figure 1).
Figure 1. Upward fluctuation in orders

CONSOLIDATION OF ORDERS

In real practice, it is very difficult to find a company that would unambiguously transform incoming orders into outgoing orders without processing and generalization (of course, we are not talking about Just-in-time systems because their application requires special conditions). The demand of the company's customers forms the input data for the inventory management system, which, as an output, gives a decision on when and how much to buy goods. As a rule, customer orders are consolidated down to the minimum lot size, which can meet or exceed optimal size order, or loading rate vehicle(truck, wagon, container). The larger the size of such an order and, accordingly, the less often an order is made, the greater will be the degree of its deviation.

On the other hand, when analyzing the demand of its customers, the company can observe large jumps, on the basis of which a conclusion will subsequently be made about a high degree of demand uncertainty. In fact, the company analyzes not the total demand of its customers, but the flow of applications, each of which is formed on the basis of individual replenishment systems. In this case, the “transformed” demand has a pronounced unevenness, which is shown in Figure

THE RESULT OF THE PRICE POLICY

Excessive fluctuations in demand can also be triggered by the company's pricing policy. Periods of price cuts or special promotions usually attract a lot of clients who, in a rush to extract maximum benefit speculative reserves are formed from the “dropped out chance”. Naturally, after the end of the promotion, an inevitable decline in orders follows, as customers begin to spend their stocks, perhaps waiting for the next period of discounts.
The Western press also mentions situations when, in conditions of shortage, clients submit deliberately inflated bids in response to a policy of partial execution. And when the level of supply finally catches up with demand, a series of order cancellations follows. The same picture was typical for the Soviet supply system, but in modern market conditions, the repetition of this model is hardly possible.

PREVENTION MEASURES

The bullwhip effect has an extremely negative effect on the efficiency of the operations of the participants in the supply chain, primarily because it provokes the accumulation of excessive safety stocks for each participant in the chain. Therefore, the development of measures to smooth this effect is one of the urgent tasks of logistics today. There are several approaches to its solution.

USE OF ADVANCED TECHNOLOGIES

This approach is based on complex information interaction between participants in the supply chain, which allows for automated analysis of final demand. For example, if a manufacturer would have access to sales data for their products directly from trading floors, then it will not be difficult for him to predict how much he should ship to the distribution center supplying this retail network. This technology is implemented by WalMart.

Among the problems of interorganizational coordination, “many companies note the Bullwhip effect or the whip effect (“bullwhip effect”, “Forrester effect”), in which from the end consumer in the direction of the existing links in the chain of production wealth and values, there are different variations in demand, due to which there is a need to increase the level of security and reliability of the supply chain, which leads to an increase in the level of stocks, distorting the forecast estimates of the needs and consumption of participants in the chain.

An example is the situation at Hewlett Packard. It was found that fluctuations in orders increased significantly as they moved from intermediaries up the supply chain to the printer division and on to the integrated circuit division. It was also noted that while the demand for the product fluctuated somewhat, the orders for the IC division varied much more. This made it difficult for HP to fill orders in time, and also increased the cost of fulfilling them.

We also note that a similar phenomenon - the whiplash effect - also occurs in the sphere of trade in consumer goods. So fluctuations in orders increase as the supply chain moves upstream from retail to production; so that orders to the manufacturer vary much more than demand retail customer, which is shown in Figure 1.1.

The objective causes of the whiplash effect can be identified as follows:

* forecast needs: the process of creating forecasts based on real and accurate information needed for forecasting. If orders are placed based on actual demand forecasts from upstream suppliers, a demand distortion effect occurs. The supplier loses the ability to realistically assess market requirements. The production plan is based on unavoidable, inefficient and distorted requirements, where the impact of the distortion increases sequentially with the number of enterprises connected in series in the supply chain;

behavior policy: the influencer is strategic behavior when placing customer orders. Distortion of information about needs can in this case come from strategic decisions of clients;

linking needs: in order planning, everyone strives to achieve an economic optimum. In this case, several periods are combined. This can lead to misinterpretation of future needs and distortion of information about the true need;

price variations: price changes, for example as part of a promotion, act as an incentive or disincentive to purchase and thus cause fluctuations in demand within the supply chain.

The whiplash effect obviously affects the supply chain, let's take a closer look at how this effect affects the costs in the supply chain.

First of all, this effect increases the cost of production in the supply chain, as a result of which the manufacturer of the goods and its suppliers try to satisfy the flow of orders, which varies much more than demand. end users. And the manufacturer can respond to an increase in demand by building excess capacity or buying additional production lines or by producing to stock and keeping surplus inventory. In both cases, the cost of a unit of production increases.

Further, the whiplash effect increases the restocking time in the supply chain. The increased variances resulting from the whiplash effect make planning more difficult for the manufacturer and its suppliers than it is for demand. There are times when available capacity and inventory does not allow all incoming orders to be filled. This is a consequence of longer restocking times within the supply chain from both the manufacturer and its suppliers.

Third, the whiplash effect increases transport costs within the supply chain. The time transport requirements for the manufacturer and its suppliers are related to the orders being fulfilled. As a result of the whiplash effect, transportation needs also fluctuate greatly over time, which indirectly increases the cost of transportation as excess transportation capacity needs to be serviced during times of high demand.

Fourth, the whiplash effect increases the labor costs associated with shipping and receiving in the supply chain. Shipment staffing requirements from the manufacturer and suppliers will fluctuate depending on the number of orders. Similar fluctuations will occur with the staffing needs of distributors and retailers. Different links can choose: contain redundant labor resources or use variable labor in response to order fluctuations. Either choice increases total labor costs.

Fifth, the whiplash effect negatively affects the functioning of each link and therefore harms the relationship between the various links in the supply chain. There is a tendency to attribute blame to other links in the supply chain, as the people involved in each link believe they are doing the best they can. Therefore, the whiplash effect leads to a loss of trust between the various parts of the supply chain and makes any attempt at coordination more difficult.

In addition, we note that the whiplash effect damages the product itself, in terms of its availability, and leads to a lack of goods within the supply chain. Large fluctuations in orders make it less likely that a manufacturer will be able to meet the orders of all distributors and retailers on time. Which, in turn, increases the likelihood that retailers will sell out their entire inventory with lost sales from empty shelves.

From all of the above, it follows that the whiplash effect, and as a result, the lack of coordination, negatively affects the functioning of supply chains. This effect removes the supply chain from an efficient level, increasing costs and reducing the chain's ability to respond to changes in environment. At the same time, the whiplash effect reduces the profitability of the supply chain by increasing its cost in order to ensure a given level of product availability.

To manage and reduce the impact of the above effect in the supply chain, the following methods are most often used:

reducing the level of instability in the chain is carried out with the help of centralization of information, each level of the chain of creation of material values and benefits is provided with complete and high-quality information about the actual demand from customers;

reduce order variation by synchronizing order cycles and harmonizing go-to-market options;

strategic partnerships within the supply chain.

However, the whiplash effect is not the only problem preventing supply chain actors from coordinating. The main obstacles to interorganizational coordination can be classified into the following five categories:

motivational obstacles;

information processing problems;

operational problems;

price barriers;

problems associated with the behavior of managers.

At the same time, the task of the manager is to identify key obstacles and then take actions to eliminate these obstacles. Let us dwell in more detail on these problems.

1. Motivational obstacles. Motivational obstacles arise due to the fact that the motives for the actions of various parts of the supply chain lead to actions that increase variability and reduce total profit supply chain. For example, local optimization within functional units or links in the supply chain. Problems of this kind will be dealt with in more detail in the next chapter.
2. Information processing problems refer to situations where the required information is distorted as it moves between different parts of the supply chain, leading to increased variability in orders within the supply chain. The most common problem of this kind is forecasting based on orders rather than consumer demand.

When forecasts are based on received orders, any change in customer demand will increase as orders move up the supply chain to manufacturers and suppliers. This is a manifestation of the whiplash effect in supply chains, when placed orders are the main means of communication between different links. Each link sees its primary role in the supply chain as fulfilling orders from downstream partners. Thus, each link judges their needs from the flow of orders received and develops a forecast based on this information.

In this scenario, a small change in customer demand becomes exaggerated as it moves up the supply chain in the form of consumer orders. Consider the impact of a random increase in a retailer's shopping demand. The retailer may interpret some of this random increase as an upward trend in demand. As a result, the retailer will order much more than the observed increase in demand, as he expects the growth to continue and orders will cover the expected demand. The increase in the order placed by the wholesaler also exceeds the observed increase in the retailer's demand. Part of the increase is only a one-time increase. The wholesaler, however, will not be able to correctly interpret the order increase. He simply observes a jump in order size and concludes that the trend is up. The upward trend implied by the wholesaler will be larger than the trend implied by the retailer. The wholesaler will thus place an even larger order with the manufacturer.

The lack of information exchange between links in the supply chain also increases the whiplash effect. For example, a retailer may increase the size of an individual order due to a planned advertising company. If a manufacturer is unaware of a planned promotion, it may interpret the order increase as a permanent increase in demand and place orders with suppliers. The manufacturer and suppliers thus have large stocks at the time the retailer has finished its advertising campaign. The retailer's subsequent orders will return to normal levels, and the manufacturer will accumulate excess inventory, with orders smaller than before.

3. Operational issues are related to activities related to placing and fulfilling orders that result in an increase in variances. It has already been mentioned before that large volume orders significantly impede the activities of the members of the supply chain that follow up the chain. At the same time, the whiplash effect also affects the retailers themselves. So in the chain, a situation often arises in which retailers have insufficient quantities of high-demand products. For example, the HP company faced such situations in its activity when the demand for its the latest products far exceeded the supply. In this case, the manufacturer resorts to the method of rationing the supply of scarce products among various distributors and retailers. The rationing scheme implies the distribution of possible deliveries of products based on placed orders. Under this scheme, if delivery is possible, for example, 75% of the total number of orders received, each retailer receives 75% of his order.

The result of this rationing scheme is the fact that retailers are trying to increase the size of their orders in order to increase the amount of goods shipped to them. A retailer needing 75 units will order 100 units in the hope that 75 units will will be available to him. The negative impact of this distribution scheme is to artificially inflate the volume of product orders. This means that a retailer that orders based on how much it expects to sell will get less and lose sales, while a retailer that over-orders will gain.

If a manufacturer uses orders to predict future demand, it will treat an increase in orders as an increase in demand, even if the consumer's demand is unchanged. The manufacturer can then respond by building enough capacity to fill all orders received. Once such capacity becomes available, orders return to their normal levels as they were inflated in response to the rationing scheme.

4. Pricing problems are related to the situation in which the pricing policy leads to an increase in the volatility of placed orders.

For example, order size discounts increase the volume of individual orders placed in the supply chain. As discussed above, the resulting large order further increases the whiplash effect in the supply chain.

Price fluctuations: Sales promotions and other short-term discounts offered by the manufacturer lead to forward sales in which wholesale companies or the retailer buys a large lot during the discount period to cover the demand of future periods. Forward purchases lead to large orders during the promotion period, after which orders decline sharply.

Note that shipments during the peak period are higher than sales during that period due to ongoing sales promotions. The period of peak batches is followed by a period of extremely small batches from the manufacturer, showing a significant increase in sales by distributors. Sales promotions thus result in volatility in manufacturer shipments that is significantly higher than volatility in retailer sales.

5. Behavioral issues have to do with the way the supply chain is built and the communication between different links. Some behavioral barriers can be identified:

each link in the supply chain considers its activities locally and does not see its impact on other links;

various links in the supply chain react to the current local situation rather than determine the main causes;

based on local analysis, different parts of the supply chain shift the blame on each other for deviations, becoming enemies rather than partners;

No link in the supply chain studies the effects of activities over time, with the most significant effects of any link occurring elsewhere. The result is a vicious circle in which the operations performed by the link create

many problems, in these problems each link blames everyone else, but not itself; "The lack of trust between partners makes them resist the costs of the operation of the common supply chain, in addition, it leads to a significant increase in efforts. And most importantly, due to the lack of trust, the information available to various links is either not distributed or ignored. Revealing obstacles and problems that arise at the interorganizational level can be focused on actions to overcome them and achieve coordination in the supply chain.These measures will be discussed in the next chapter.

As mentioned earlier, the whip effect is a phenomenon in supply chains that increases the amplitude of fluctuations in demand or order volume as it moves away from the real source of demand in the supply chain. This means that supply chain fluctuations closer to the consumer are much weaker compared to the other side of the supply chain closer to the manufacturer or supplier.

Fluctuations in demand increase as they move along the supply chain from the retailer to the end of the supply chain, such as a supplier. It should be noted that the more counterparties in the supply chain, the more extensive the effect of the whip, namely, the increase in lead time

The more links in the supply chain and the longer the lead time, the greater the amplitude of the fluctuation. This term was first used by J. Forrester. In the 1950s, he first demonstrated mathematical model increasing demand as it moves up the supply chain. The term was introduced around 1990 when Procter & Gamble sensed a misplaced order fluctuation in their baby diaper supply chain. However, the greatest contribution to the development of the concept of the whip effect was made by H. Lee in 1997 in his work entitled "The bullwhip effect in supply chains". The whip effect has an extremely negative impact on the efficiency of supply chain management, namely, it leads to an excessive increase in safety stocks, an increase in logistics costs, an unnecessary increase in production costs and overhead, potential product degradation, and worse, poor customer service and lost sales.

As a result of studying chapter 6, the student should:

know

the concept and causes of the whiplash effect in supply chains;
the relationship between the causes of the whiplash effect: the effects of Forrester, Burbidge, Halligan;
negative consequences of the whiplash effect in the supply chain and ways to eliminate it;
definition of the concepts of "sustainability" and "reliability" of supply chains;
the impact of sustainability on the performance of the supply chain;
the concept of supply chain flexibility;
principles of supply chain dynamism;

be able to

Determine the quantitative parameters of the reliability and sustainability of supply chains;

own

a methodology for building a flexible and dynamic supply chain.

The whiplash effect in supply chains and the issue of sustainability

The essence and causes of the whip effect

In traditional business, inventory management is disintegrated, i.e. each company only controls the level and consumption of its inventory and places purchase/production orders on that basis. Each counterparty of the supply chain, based on data on the current level of only their own stocks and on data on customer orders, tries to adjust the inventory management system in such a way as to provide the standard profitability and the desired level of service to their customers (local optimization). When predicting the future consumption of its stocks, each participant in the supply chain is based on data on customer orders placed over a certain period, while not taking into account their nature. Not understanding the nature of orders and not possessing operational information about their consumption (sales), the supplier cannot accurately explain certain fluctuations in demand, resulting in the so-called culture of guesswork ( double-guessing culture), which is the primary reason for the increase in fluctuations in orders up the supply chain, i.e. the emergence of the so-called whip effect (Fig. 6.1).

whip effect (bullwhip effect) is a relatively new term, first systematically used in relation to DRM in the works of H. L. Lee. This effect consists in a situation where the orders received by the supplier from the buyer have more pronounced fluctuations than the sales of the buyer to his customers. Further, these deviations with an increase (in the form of a wave) spread up the supply chain to its initial link, thereby reducing the stability of the supply chain in relation to the optimal level of stocks (Fig. 6.2) .

Interpretation of the stability of the supply chain in relation to the volumes of inventory available from various counterparties of the chain

Rice. 6.1.

Rice. 6.2.

owls is to maintain a balance of the overall level of stocks in value terms (from the standpoint of optimization working capital) and an acceptable level of customer service (required assortment/nomenclature and ensuring stock availability) in the supply chain. With respect to the situation depicted in Fig. 6.1, the cybernetic analogy with resilience is also relevant. technical systems when small fluctuations external factors at the input of the system can cause resonant self-oscillations of the monitored (controlled) parameters of the system and bring it out of the equilibrium state (set setting).

There are four causes of the whiplash effect: deviations from planned dates and volumes of production and deliveries, misinterpretation of demand signals, price fluctuations, arbitrary increase in the size of supply lots. The relationship of these reasons is shown in Fig. 6.3.

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