Bull Whip and Reverse Bullwhip Effect in After Sales Service Supply Chains
Dr. Manish Shukla
Malaysia Institute for Supply Chain Innovation
In a supply chain the Bullwhip effect (BWE) shows how amplification of demand can impact upon inventory, cost and customer service levels. The BWE in this research is generated by the variability in customer demand moving from the customer to suppliers via retailers whereas Reverse Bullwhip effect (RBWE) is generated by variability in supply capacity moving from supplier to customer via retailers. The supply uncertainty due to variability in supply capacity may be a result of frequent supply disruptions and yield volatility issues. This research proposes a hypothesis that a bullwhip in sales may cause a reverse bullwhip in case the products re-enter the supply chain. The products can be classified into two broad categories based on the way in which they enter the supply chain. One category illustrates where the products enter into a new supply chain at the end of its life such as metal scrap from cars, new-paper envelopes, etc. Whereas the second category shows the products re-entering the same supply chains such as refurbished parts, refill bottles, currency notes, etc. This makes the problem very complex and difficult to address. Moreover a Bullwhip in sales will have a reverse bullwhip in the demand for that product. The service provider will experience a compound effect of sales bullwhip due to the large number of products re-entering into the supply chain. When there is a combination of BWE and RBWE generated due to both supply and demand variability, the supply chain may cause higher variation not only upstream or downstream but also anywhere in the chain. It is required for the organizations to critically analyze their demand and supply variability and factors affecting it.
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