Supply Chain Management: The Bullwhip Effect In Supply Chain Management

The bullwhip effect was recognized by Forrester in the middle of the twentieth century and was coined as a term by Procter & Gamble management. If one moves up in a supply chain, this phenomenon appears as the variance amplification in replenishment orders. It is considered harmful because of its consequences such as: excessive inventory investment, poor customer service level, lost revenue, reduced productivity, more difficult decision-making, sub-optimal transportation, sub-optimal production etc.

The origin of LANXESS can be traced back till 1863 when Bayer was founded. A strategic realignment of Bayer’s business in 2005 gave birth to LANXESS. It is a well-diversified company in the field of specialty chemicals with a diverse product range

The bullwhip effect can be explained as an occurrence detected by the supply chain where orders sent to the manufacturer and supplier create larger variance then the sales to the end customer. These irregular orders in the lower part of the supply chain develop to be more distinct higher up in the supply chain. This variance can interrupt the smoothness of the supply chain process as each link in the supply chain will over or underestimate the product demand resulting in exaggerated fluctuations (Nienhaus,

There have been issues of demand-supply mismatches; the company has been left holding costly inventories at one place though there was high demand in another location. Similarly, it has also lost out some others as the delivery schedules were not acceptable to the clients . The SBU has clearly defined Key Performance Indicators (KPIs) and there has been a mismatch between targets and achievement. Though it is focusing on demand estimation and supply planning, it has also decided to and identify shortfalls in the process and necessary changes to overcome them and focus on the S&OP process. This research will focus on four key areas:
i. RQ1: What are the gaps between the company’s current S&OP process to the standards according to literature? ii. RQ2: Which effect on the relevant KPIs do these gaps have? iii. RQ3: Which of these gaps should be closed immediately to achieve a measurable improvement in KPIs? iv. RQ4: What are the key success factors in the implementation of these identified gaps taking the company’s context into account?
5. Research Methodology
Methodology to be followed for determining the variance in Supply Chain Management and providing the solution to reduce/eliminate the same will be done via following:
i. Case Study Research ii. Literature review & surveys of other secondary data iii. Present and historical