Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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![### Understanding the Bullwhip Effect in Supply Chains
#### Problem Statement
3. **Consider the supply chain illustrated below:**
- Manufacturer: Variance of orders = 1150 units
- Wholesaler: Variance of orders = 1200 units
- Retailer: Variance of orders = 600 units
_Last year, the retailer's weekly variance of demand was 500 units._ The variance of orders was 600, 1200, and 1150 units for the retailer, wholesaler, and manufacturer, respectively.
(Note that the variance of orders equals the variance of demand for that firm’s supplier.)
**Tasks:**
a) Calculate the bullwhip measure for the retailer. Is the bullwhip effect present here?
b) Calculate the bullwhip measure for the wholesaler. Is the bullwhip effect present here?
c) Calculate the bullwhip measure for the manufacturer. Is the bullwhip effect present here?
d) Which firm appears to be contributing the most to the bullwhip effect in this supply chain? Why?
#### Explanation of Graphs/Diagrams:
- **Flowchart of the Supply Chain:**
```
1150 1200 600
Manufacturer -> Wholesaler -> Retailer -> Retailer
```
This flowchart demonstrates the flow of goods from the manufacturer to wholesaler to the retailer, with respective order variances indicated.
#### Key Concepts:
**Bullwhip Effect:**
The bullwhip effect is a phenomenon in supply chains where small variances in consumer demand cause progressively larger variances upstream in the supply chain. It can lead to inefficiencies and higher costs.
**Calculating Bullwhip Measure:**
The bullwhip measure can be calculated using the formula:
\[ \text{Bullwhip Measure} = \frac{\text{Variance of orders}}{\text{Variance of demand}} \]
**Calculations:**
1. **Retailer:**
\[ \text{Bullwhip Measure} = \frac{600}{500} = 1.2 \]
The bullwhip effect is present if the measure is greater than 1.
2. **Wholesaler:**
\[ \text{Bullwhip Measure} = \frac{1200}{600} = 2 \]
The bullwhip effect is indicated due to a measure greater than 1.
3](https://content.bartleby.com/qna-images/question/e23436e2-3710-4584-9afd-a6782603d0bb/2504b154-7e42-448a-82f8-d0b0a9545dcb/7gk6fs3_processed.jpeg)
Transcribed Image Text:### Understanding the Bullwhip Effect in Supply Chains
#### Problem Statement
3. **Consider the supply chain illustrated below:**
- Manufacturer: Variance of orders = 1150 units
- Wholesaler: Variance of orders = 1200 units
- Retailer: Variance of orders = 600 units
_Last year, the retailer's weekly variance of demand was 500 units._ The variance of orders was 600, 1200, and 1150 units for the retailer, wholesaler, and manufacturer, respectively.
(Note that the variance of orders equals the variance of demand for that firm’s supplier.)
**Tasks:**
a) Calculate the bullwhip measure for the retailer. Is the bullwhip effect present here?
b) Calculate the bullwhip measure for the wholesaler. Is the bullwhip effect present here?
c) Calculate the bullwhip measure for the manufacturer. Is the bullwhip effect present here?
d) Which firm appears to be contributing the most to the bullwhip effect in this supply chain? Why?
#### Explanation of Graphs/Diagrams:
- **Flowchart of the Supply Chain:**
```
1150 1200 600
Manufacturer -> Wholesaler -> Retailer -> Retailer
```
This flowchart demonstrates the flow of goods from the manufacturer to wholesaler to the retailer, with respective order variances indicated.
#### Key Concepts:
**Bullwhip Effect:**
The bullwhip effect is a phenomenon in supply chains where small variances in consumer demand cause progressively larger variances upstream in the supply chain. It can lead to inefficiencies and higher costs.
**Calculating Bullwhip Measure:**
The bullwhip measure can be calculated using the formula:
\[ \text{Bullwhip Measure} = \frac{\text{Variance of orders}}{\text{Variance of demand}} \]
**Calculations:**
1. **Retailer:**
\[ \text{Bullwhip Measure} = \frac{600}{500} = 1.2 \]
The bullwhip effect is present if the measure is greater than 1.
2. **Wholesaler:**
\[ \text{Bullwhip Measure} = \frac{1200}{600} = 2 \]
The bullwhip effect is indicated due to a measure greater than 1.
3
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Step 1 Given the following information in the question as follows:
VIEW Step 2 a) Calculate the Bullwhip measure for the retailer :
VIEW Step 3 b) Calculate the Bullwhip measure for the wholesaler:
VIEW Step 4 c) Calculate the Bullwhip measure for the manufacturer:
VIEW Step 5 d) Firm that contribute most to the bullwhip effect.
VIEW 
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