To get them off the dealers’ lots, Volvo’s sales department offered special deals, so demand for green cars increased. Lee tells about how Volvo found itself with extra inventories of green cars. The bullwhip effect is illustrated by a story Prof. ![]() Decisions made by groups along the supply actually worsen shortages and overstocks. This lack of coordination coupled with the ability to influence while being influenced by others leads to what Stanford’s Hau Lee refers to as the Bullwhip Effect. Further, each group is influenced by decisions that others are making. Each group has control over only a part of the supply chain, but each group can influence the entire chain by ordering too much or too little. Suppliers, manufacturers, sales people, and customers have their own, often incomplete, understanding of what real demand is. ![]() ![]() The problem turns out to be one of coordination. So why is it that, in a recent article, the Economist claimed that, “Managing a supply chain is becoming a bit like rocket science”? The basic concept behind supply chain management is simple: customers order products from you you keep track of what you’re selling, and you order enough raw materials from your suppliers to meet your customers’ demand.
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