Reliability, stability and dynamism of supply chains, Whip in...

Reliability, Sustainability and Dynamics of Supply Chains

Based on the results of the study of Chapter 6, the student must:

know

the notion and reasons for the appearance of the whip effect in supply chains;

• the relationship between the causes of the formation of the whip effect: the effects of Forrester, Barbidge, Haligan;

• the negative consequences of the effect of the whip in the supply chain and ways of eliminating it;

• Definition of the concepts Sustainability and Reliability supply chain;

• the impact of sustainability on the performance of the supply chain;

• the concept of supply chain flexibility;

• principles of dynamic supply chain;

be able to

• determine the quantitative parameters of reliability and stability of supply chains;

own

method of building a flexible and dynamic supply chain.

Whip in supply chains and stability problem

The essence and causes of the whip effect

In traditional business, inventory management is disintegrated, i.e. each company controls the level and consumption of only its stocks and on this basis places purchase/production orders. Each supply chain contractor, based on data on the current level of its own reserves only and on customer order data, tries to set up a stock management system in such a way as to ensure the normative profitability and the desired level of service to its customers (local optimization). Forecasting the future consumption of their stocks, each participant in the supply chain is based on data on orders placed for a certain period of customers, while not taking into account their nature. Not understanding the nature of the orders and not having operational information about their consumption (sales), the supplier can not accurately explain these or other fluctuations in demand, resulting in the emergence of the so-called culture of guesses ( double-guessing culture), which is the primary reason for the growth of fluctuations in orders upstream of the supply chain, i.e. the appearance of the so-called whip effect (Figure 6.1).

The whip effect (bullwhip effect) is a relatively new term first used systematically in relation to the DRM in the work of JL Lee [168,169]. The given effect consists in a situation when the orders received by the supplier from the buyer, have more expressed fluctuations, than sales of the buyer to its clients. Further, these deviations with increasing (in the form of a wave) propagate up the supply chain to its initial level, thereby reducing the stability of the supply chain relative to the optimal stock level (Figure 6.2) [130]. ​​

The treatment of the stability of the supply chain in relation to the volumes available to the various counterparties of the chain -

Growth in order fluctuations as they move up the supply chain

Fig. 6.1. Growth in order fluctuations as they move up the supply chain

Whip's effect in the supply chain

Fig. 6.2. Whip in the supply chain

ows consists in maintaining the balance of the general level of reserves in terms of value (from the position of working capital optimization) and an acceptable level of customer service (the required assortment/nomenclature and ensuring availability of stocks) in the supply chain. In relation to the situation depicted in Fig. 6.1, the cybernetic analogy with the stability of technical systems is also appropriate, when small fluctuations of external factors at the input of the system can cause resonance self-oscillations of the monitored (controlled) parameters of the system and derive it from the equilibrium state (given tuning) [3].

There are four reasons for the appearance of the whip effect: deviations from the planned terms and volumes of production and supply, incorrect interpretation of demand signals, price fluctuations, arbitrary increase in the size of shipments. The relationship of these reasons is shown in Fig. 6.3 [130]. ​​

Consider the reasons listed below.

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