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MANAGING BULLWHIP EFFECT: TWO CASE STUDIES

N. Ravichandran Indian Institute of Management, Ahmedabad, India, E-mail: [email protected]

ABSTRACT

Purpose: The purpose of this paper is to present two examples based on real life experiences where the Bullwhip effect (BWE) in supply chain is considerably reduced. Both examples relate to the consumer durables industry in India.

Design/methodology/approach: The first example uses enterprise resource planning and vendor managed inventory as tools to reduce the BWE. The second example uses a modification of the classical inventory control policies to eliminate BWE.

Research limitations/implications: This paper could initiate research in an area which would help supply chain researchers and managers to understand why some companies are able to contain BWE and others are not.

Findings: Based on these two empirical case studies, the paper argues that managing BWE is a strategic initiative by organ- ization and the best approach is a combination of several tactical initiatives.

Originality/value: This paper briefly summarizes the managerial approaches to tame BWE in two different contexts. The two examples have some similarities, differences and offer unique insights related to managing BWE.

Keywords: India, Supply chain management, Demand management, Consumer durables

Paper type Research paper

INTRODUCTION

Bullwhip effect (BWE) is a well-researched and docu-

mented topic in the area of supply chain management.

At the basic level it refers to the propagation of

demand variation at the upstream elements of the

supply chain partners in the organization. The concept

of BWE was introduced with an analytical frame in

Lee et al. (1997a). An article explaining the implications

of BWE to managers was elaborated in Lee et al.

(1997b). In a subsequent review Lee et al. (2004), the

authors discuss various research initiatives in supply

chain literature arising out of the need to understand

the causes resulting to BWE, means to quantify the

effect, responses and methodologies used by organiz-

ations in responding to BWE.

At the macro level, BWE induces inefficiencies in

production, scheduling (capacity utilization), sourcing,

distribution, revenue generation and its realization. At

the operating level, it generates more (additional) inven-

tory and keeps it in the most inappropriate place, to meet

a specified service level. At the performance level it can

reduce the velocity of cash, destroy potential revenue

and erode (in a significant way) by price discounts the

revenue realization. It can potentially dilute a competi-

tive (strategy) and position and therefore can be a strat-

egy buster.

The best example of a sequence of tactical errors that

can happen on account of BWE to erode the competitive

positioning of an organization is documented in the

HBS case on Procter & Gamble. We capture the essen-

tial abstraction of this in the next few paragraphs:

(1) The demand forecast at the upstream of a supply

chain is based on the actual demand plus a noise-

factor. Thus, in reality the input available for

demand forecast is not real, it is a distortion

Journal of Advances in Management Research Vol. 5 (II) 2008 (pp. 77 – 87)

based on the perception of the channel member or

a supply chain partner close to the demand.

(2) Based on the inflated demand, capacity enhance-

ment decisions (or sourcing contracts have been

obtained) which partially or fully contribute to

the increase in the fixed cost leading to a competi-

tive disadvantage position.

(3) In a competitive set up, the pressure to utilize the

installed capacity to achieve economics of scale

is high, leading to a rate of production and

higher than the consumption rate.

(4) The inventory flow in the system and stock levels

at various stages in the supply chain are driven by

the complicated dynamics of price discounts and

economics of transportation.

(5) Thus, even when the production is more than the

projected demand, stock may not be available to

service a specified demand.

(6) If there is a conflict of interest among various

members of the supply chain, the system would

accumulate finished good inventory, resulting in

various price discounting schemes and consumer

inducement mechanisms.

(7) Once the product promotion schemes are in full

swing, the demand realized and reported is dis-

tinctly different from actual demand. Thus, fore-

casting irrespective of the sophistication of the

tool used is at best an approximate and sometimes

dangerously unreal. Accordingly, the stated com-

petitive position of the organization is either

destroyed or diluted.

In the context of P&G (HBS case – 1995) the brand pos-

ition of the product (premium price) was diluted to dis-

count-based sales and hence leading to lower sales

realization. As a consequence of BWE and a plethora

of discount sales introduced by the company, the trade

started buying the product to stock rather than to sell.

Trade made money by taking advantage of contradicting

sales discounts and promotional schemes. This further

led to demand profile distortion and inaccurate

forecasting.

According to Lee et al. (1997a), the BWF is a conse-

quence of one or a combination of the following four

important aspects related to supply chain management.

These are: demand forecast updating by supply chain

partners; order batching to take advantage of transpor-

tation economics; price fluctuation (leading to distorted

consumption pattern); and rationing based on demand

supply imbalances. It may be worthwhile to reiterate

that BWE is not only caused by any one of these

aspects of the supply chain but could also be owing to

any combination of these aspects.

In the cited articles several managerial responses to

stem or contain the BWE are suggested. They include

use of point-of-sale data to forecast demand, electronic

data interchange for order information sharing, vendor-

managed inventory, discount for sales information

sharing, lead time reduction, combining truck delivery,

internet-based ordering, every day low price, activity

based costing, sharing sales, capacity and inventory

data (to avoid shortage gaming), allocation method-

ology based on past sales, etc. It is useful to note that

these measures would contain one of the reasons respon-

sible for BWE. A successful strategy to contain BWE

would require a combination of several such measures

in a judicious way based on the context.

Before we proceed with our examples of situations

which have successfully contained BWE, it is worth-

while to summarize two important observations

related to BWE in the cited references:

(1) BWE is not an external phenomenon. The indus-

try is governed and influenced by the external

environment. BWE is an internal (firm level)

response to the environmental phenomena.

(2) BWE is a consequence of rational behaviour of

the supply chain partners. It usually reflects

when partners operate in isolation and optimize

their individual objective function. Accordingly,

there is no coordination among the supply chain

partners or, if it exists, it is weak.

In the remaining part of this article, we present two

Indian case studies where an appropriate managerial

response to BWE was implemented. We conclude this

article with a broad framework and a methodology to

contain BWE in a wide range of supply chain

environments.

CASE STUDY 1 – HINDUSTAN OIL COMPANY (HOC)[1]

HOC Profile

This case study pertains to an FMCG company called

HOC, which is in the business of branded hair oils,

MANAGING BULLWHIP EFFECT: TWO CASE STUDIES

78 Journal of Advances in Management Research vol. 5(II) pp. 77 – 87, 2008

edible oils, fabric care, skin care and processed food. It

recorded a turnover of Rs. 8 billon in the year 2003.

ROC was larger than 30 per cent. Sales registered

(during 1999-2003), a combined annual growth rate of

6 per cent and the corresponding profit figure of 16 per

cent. HOC reached nearly 100 million people through

1.7 million retail outlets. In addition, it sold 46 million

consumer packs every month, reached 18 million house-

holds and employed 1,000 people.

Growth Strategy

The primary focus of the business strategy is to aim at

market leadership, by building brand, strengthening

the distribution system, controlling cost and using inno-

vative management practices to support the business

activities. HOC has significant presence in the global

market. HOC wanted to support its growth plan by

increasing use of technology, value added products,

repositioning hair oil (a commodity) as a personal care

product and converting edible oils as a nutrient-based

product.

Managerial Impediments

However, there are number of issues which did not

allow HOC to grow rapidly. They included inaccurate

forecasting (a result of non-sophisticated mathematical

models), sales opportunities lost as a result of mal-distri-

bution, non-availability of stock and low delivery per-

formance reflecting in unacceptable service level.

There were issues related to shrinkages, damages and

product sold in the market after the useful life time.

Information availability on stock was sparse. Depart-

mental silos and a myopic approach to business led to

sub-optimal solutions. As a consequence of inter depart-

mental transfer of stock, and high inventory at various

locations contributed to the increased cost of delivery.

Supply Chain Structure

The supply chain consisted of a network of plants,

depots, distributors and retailers. HOC managed 12

brands in 100 stock keeping units (SKUs). The distri-

bution network was complex and 98 per cent was unor-

ganized. HOC owned six factories and had long-term

arrangements with 15 contract manufacturers. There

were 32 stock locations, 1,000 distributors and 1.2

million retailers which enabled HOC to reach the rel-

evant customer segment. The manufacturing activity

was relatively simple. No major capacity constraints

were anticipated. Part of the capacity cushioning was

facilitated by contract manufacturing. Sourcing was

restricted to commodity buying. A handful of items

were purchased based on commodity auction.

Sales Fluctuation

The sales fluctuated widely. The ratio between peak and

minimum sales for popular brands over a period of a

year was 3:1 (see Figure 1). Sales within a month

were extremely skewed. On an equal period of ten

days (three consecutive ten days), the company recorded

10, 28 and 62 per cent sales. This meant roughly two

thirds of the sales happened in the last ten days of any

month.

Planning Cycle

The planning cycle was 15 days. The planning was

frozen three months before. Quarterly targets led to

the sales push in the last month. The inevitable conse-

quence was inventory build up and mal-distribution.

Customer dissatisfaction, reduced sales and eroded prof-

itability are the add on factors.

Information Systems

The information systems were primitive. Most of the

planning systems were Excel spreadsheet based. There

was no system related to distribution planning. Many

Figure 1. Peak/Minimum Sales Ration Variation Across the Year as High as 3:1 (Key Brand).

MANAGING BULLWHIP EFFECT: TWO CASE STUDIES

Journal of Advances in Management Research vol. 5(II) pp. 77 – 87, 2008 79

islands of information systems designed and developed

on various platforms contributed to confusion, data

inaccuracy and inconsistency. There was no common

database across HOC.

ERP Selection

Based on a detailed internal study, HOC implemented

an ERP solution. The (ERP) selection was based on

the data and process integration that can be provided

by the ERP package, rich functionality and features of

the ERP product and product support services, Indian

presence of the ERP vendor, recommendations by

leading management consultants, track record of the

ERP vendor, ability to scale up the system and FMCG

experience of the vendor company in India and abroad.

ERP Implementation

The implementation was completed with the strong

commitment and support of the management. Appropri-

ate resources were made available. Training and edu-

cation preceded ERP implementation. Counseling was

available on change management initiatives. The

major modules which facilitated the supply chain effi-

ciency included demand planning (forecasting accu-

racy), data warehouse (reduce mal-distribution and

lost sales) and vendor management inventory (to

improve response time).

Tactical Measures

The forecasting was improved by using data on primary,

secondary and off-takes in the market. The sales and

marketing schemes were made uniform and robust to

reduce seasonality. Target-based planning was de-

emphasized. The last three months’ sales average was

used to benchmark the forecast.

To reduce the skewed sales, no dumping of stocks

was resorted to. Targets were based on secondary

sales (between depots to distributors) rather than

primary sales (between plants to depots). Excess inven-

tory was reduced at the distributors’ level based on the

new stock norms proposed. Vendor managed inventory

was used as a policy to refill the stock at the distributors.

Metrics

Several performance metrics related to inventory levels,

skewness of sales, percentage of distributor stock out,

percentage of depot stock out, excess stocks and fore-

casting accuracy enabled HOC to control and manage

inventory flow.

Results

As a consequence of ERP implementation, changes in

the inventory policy and vendor managed inventory,

the ratio of peak to minimum sales, dropped from 3 to

1.3 for the same average sale (see Figure 2). The other

benefits as a consequence of taming BWE are listed in

Table 1.

Areas of Improvement

As a consequence of the ERP implementation, HOC can

now focus on lost sales, damaged items and shrinkages.

It has time and managerial energy to concentrate on

improved sales of small brands. Further, the marketing

managers would be able to spend more time on sales

rather than chasing stocks. The next set of improve-

ments would come from an automatic billing process,

reduced skewness of sales leading to better availability

of products and service levels, and efforts to reduce

mal-distribution.

Figure 2. Peak to Minimum Ration Down from 3 to 1.3 Average

Sales is Same.

MANAGING BULLWHIP EFFECT: TWO CASE STUDIES

80 Journal of Advances in Management Research vol. 5(II) pp. 77 – 87, 2008

CASE STUDY 2 – SKITTLES INDIA LIMITED (SIL)

Profile

SIL was an organization which sold a wide range of pro-

ducts known as skittles ex-stock. The four manufactur-

ing facilities of SIL were located in South India. The

finished products from various manufacturing locations

were brought to a central warehouse (CWH) in a

southern metro for further distribution (through 20

branch sales offices) to customers all over the country.

Every branch administered a local warehouse to

receive, store and sell skittles. The 20 sales branches of

SIL were grouped under five geographical regions,

for sales and marketing administration.

Product(s)

Skittle as a product was characterised by three basic

attributes, the raw material used, final colour of presen-

tation and the pack size in which it was offered. Differ-

ent market segments would require independent

products in terms of composition, colour and size.

From the marketing point of view, skittles appeared in

different brands, characterised by several colours

within a brand and a final stock-keeping unit based on

its presentation in terms of size. SIL manufactured and

sold 170 types of skittles under 300 brands.

Production

The production process from raw material to finished

product consisted of four broad processing stages

designated as A, B, C and D. These sequential processes

in turn generated various sub-processes based on the end

product specifications. Not all skittles needed to go

through all the four manufacturing processes.

Distribution

The national distribution network of skittles resulted in

material flow from manufacturing locations to CWH,

branch offices, dealers and retailers. Often skittles

were sold directly to industrial customers. The fluctu-

ation in demand (quantity) for skittles sold in the dom-

estic market was large. A brief description of seven

representative brands is given in the Appendix.

Table 2 shows actual sales and forecasts for these

brands.

Competition

SIL had two national-level competitors, both enjoying a

relatively smaller market share. Skittles were also pro-

duced by a host of (unorganized sector) local manufac-

turers. The presence of a large unorganized sector

producing and selling skittles at very low price, charac-

terised by dubious quality and non-uniform sizes, com-

plicated the market dynamics.

Planning

The fundamental input to logistics operations was from

marketing in terms of (where, what, when and how

much) item-wise sales plan. This was translated by

logistics in consultation with production as a manufac-

Table 1: Improvement in Metrics in HOC after ERP Implementation

Metrics Before After Remarks

Distributor stockouts 30 15 Average distributor stock. out in %

Excess inventory at

distributors

430 220 Excess over month plus norm in rupees lakhs

Stockouts 21 9 Average depot stock out in %

Inventory 29 22 Average inventory in number of days (depot þ plant þ intransit)

Forecast accuracy 76 82 Accuracy at depot level for a 15% band

Freshness index 98.20% 99.40%

Skewness within months

(blockwise)

10:28:62 24:34:42 Percentage sales per block of ten days

Source: Kamath (2005) and Ravichandran (2004)

MANAGING BULLWHIP EFFECT: TWO CASE STUDIES

Journal of Advances in Management Research vol. 5(II) pp. 77 – 87, 2008 81

turing plan (what, how much, when and where to

produce). After completing production, issues related

to allocation (which branch would get how much of

what item) was decided. The finished goods inventory

distribution to branches took place according to the inte-

grated business plan and the consequential sales plan,

manufacturing plan, allocation plan and the despatch

plan.

Replenishment Policy

Since SIL operated on a sale-based replenishment

system, reorder points (ROP) and reorder quantities

were calculated based on the lead time for replenish-

ment, and its variations, combined with demand fluctu-

ations. When stocks at the branch warehouses fell to the

ROP level an order for reorder quantity (ROQ) was

placed on CWH for replenishment. For certain classes

of items, a flexible ROQ was followed (see Appendix

for additional details of circulation level).

Logistics Function

The logistic function was charged with the responsibil-

ity at SIL, to ensure safe custody of finished goods, stock

accounting of the material received from the manufac-

turing locations, and accurate despatch of finished

goods to various branches. On an average, four trucks

(approximately ten MT each) of material arrived in a

day at the CWH and an equal quantity of material was

despatched daily from the CWH. Each truck contained

about 300 cartons of finished goods.

Despatch Plan

This despatch plan was arrived at by considering: the

stock available in the CWH; the immediate projected

inflow from manufacturing; the prevailing market con-

dition at the branch location; the peculiarities of the

branch, item and item branch combination; truck des-

patch plan and truck availability to the branch.

Table 2: Estimated vs Actual Sales of Select SKUs of SIL

SKU January February March April May June July August September October November December

All India sales

Units ’000

A 123 118 144 146 131 131 134 123 112 135 131 237

B 110 126 130 139 152 143 99 96 118 134 120 215

C 39 42 48 60 51 39 39 40 44 54 48 66

D 159 164 215 247 244 214 164 179 177 206 157 288

E 200 221 293 319 326 229 181 216 265 240 244 354

F 88 103 113 93 96 115 95 99 94 85 125 143

G 67 68 105 108 128 111 95 116 100 81 125 172

All India estimate

Units ’000

A 86 119 170 127 179 175 105 118 136 152 155 172

B 103 134 186 144 199 184 103 118 150 143 147 187

C 36 47 65 51 70 66 32 38 44 62 66 74

D 128 171 273 217 279 268 154 163 224 243 228 266

E 154 191 341 229 323 287 180 198 282 297 240 301

F 76 90 120 91 105 128 85 95 109 109 112 124

G 84 98 138 88 127 147 104 117 140 120 143 177

Sales/estimate in % age (all India) A 143 99 85 115 73 75 128 104 82 89 85 138

B 107 94 70 97 76 78 96 81 79 94 82 115

C 108 89 74 118 73 59 122 105 100 87 73 89

D 124 96 79 114 87 80 106 110 79 85 69 108

E 130 116 86 139 101 80 101 109 94 81 102 118

F 116 114 94 102 91 90 115 104 86 78 112 119

G 80 69 76 123 101 76 91 99 71 68 87 97

Source: Ravichandran (2003)

MANAGING BULLWHIP EFFECT: TWO CASE STUDIES

82 Journal of Advances in Management Research vol. 5(II) pp. 77 – 87, 2008

An elaborate computer communication network had

been set up between the CWH and branches so that at

the end of the business day, the branches transmitted

the exact quantity that had been invoiced during the

day, which was converted as order pending on CWH.

Based on the pending order, it took less than half a

day to identify the availability of stock at the CWH.

At the CWH, cumulative requirements of a stock item

across branches, and the stock available was compared

to plan for any rationing on demand-supply. Deviations

were considered on special circumstances and merits.

The CWH computer kept track of how much quantity

was in circulation for a skittle, including the stock in

branch, stock on transit, stock in the warehouse allo-

cated for a branch, orders to CWH from branches. Nor-

mally, the physical stock in branch and the orders

pending from the branch on CWH would constitute

the safety stock that was to be kept at the branch for a

specific item.

The replenishment system was triggered by a sale in

the branch. As and when sales were invoiced, an order

was placed in the CWH for refilling. If stock was avail-

able, it was refilled and order was responded to by a des-

patch. If stock was not available at the CWH, refill order

was converted as an order on manufacturing where it

joined a queue for further processing (see Figure 3).

The level of stocks maintained at CWH for skittles was

based on estimates of manufacturing cycle time and

demand fluctuations on the daily forecast of all India

sales (i.e. annual forecast divided by 365). Production

planning at manufacturing locations aimed to maintain

CWH stocks at predetermined levels based on:

(1) ABC classification of the item at the national

level.

(2) The stock position at CWH.

(3) Days of stock cover (stock at CWH divided by

the average daily forecasted sales).

Constraints in production relate to lot size constraints

(skittles necessarily have to be made in certain lot

sizes), production line balancing constraints (balancing

between whites and colours), total capacity constraints,

constraints on total quantity of specials and constraints

on material availability for each stage of manufacturing.

The replenishment policy at SIL was an assortment of

periodic replenishment system, classical ROP, ROQ

model and a variation of ROP, ROQ model called circu-

lation level. All items at the CWH were classified in the

three district groups (see Table 3).

The ROP was influenced by the following factors:

(1) Daily demand estimate (obtained by dividing the

all India sales forecast by 365).

(2) Fluctuation factor (determined on a case to case

basis for item branch combinations).

(3) Replenishment lead time (includes all time

delays due to order communication, order proces-

sing, allocation and load building time and transit

time).

Figure 3. The Concept of Circulation Level.

MANAGING BULLWHIP EFFECT: TWO CASE STUDIES

Journal of Advances in Management Research vol. 5(II) pp. 77 – 87, 2008 83

ROQ was fixed at 30 days of requirement. The all-India

annual sales estimate was used to compute this

requirement.

When ROP þ ROQ was larger than a carton content,

it was termed “circulation level”.

When an item is under ROP, EOQ policy a refill

request was generated only when the physical inventory

is lower than or equal to ROP. When an item is under

periodic review policy, at specified intervals refill

request for a variable quantity is generated.

When an item is under circulation level, the order fill

quantity is increased on every occasion when there has

been a real demand at the branch level. As a conse-

quence, the amount of inventory (both virtual and phys-

ical) would remain a constant. For example, the physical

stock at the branch, the quantity requested for an order

fill, stock allocated for the branch at the CWH and the

goods in transit would add up to the circulation level.

As and when there is a consumption at the branch, this

demand is translated to a despatch (or reduction in

CWH stock) which in turn places an order with the pro-

cessing plants.

The concept of circulation level was extended

between the CWH and manufacturing locations. The

ROQ in this case was determined by the manufacturing

constraints. The fluctuation factor is determined for an

individual skittle at an all-India level. The replenish-

ment lead time includes order communication time,

time an order waits before manufacturing begins, man-

ufacturing throughput time and transit time to the CWH.

REFLECTIONS

We have briefly summarized the managerial approaches

to tame BWE in two different contexts. The two

examples have some similarities, some differences and

offer unique insights related to managing BWE. The fol-

lowing observations are in order.

Both the situations correspond to:

(1) Multiple products and several SKUs.

(2) Operate under significant competitive pressure.

(3) The elements of the supply chain are owned by

the organization.

(4) The supply chain is complex network and is

spread wide geographically.

(5) Demonstrated an ability to contain BWE.

The differences are:

(1) HOC has made a small beginning towards a pull

system. It needs to evolve.

(2) SIL has perfected a pull-based system. Additional

generation of non-moving inventory is not feas-

ible in SIL.

(3) Non-moving inventory need to be managed care-

fully in the context of HOC. Constant vigilance is

needed. The system is still driven by forecast, dis-

patch and production components.

(4) The improvement in HOC is a combination of

managerial and other tactical measures.

(5) In SIL, the improvement is primarily based on the

pull system implemented.

(6) HOC is a comprehensive managerial initiative.

SIL is a simple but a significant response to mini-

mize the effect of BWE.

(7) SIL uses a combination of inventory control

measures to reduce non-moving inventory in

the system.

(8) Every demand in the system is eventually trans-

lated to inventory transfer or a production unit

(in the context of SIL).

Unique Features of HOC Implementation

(1) HOC has used ERP as a basis to streamline inven-

tory flow, increase service level and improve the

distribution cost.

(2) There are three major initiatives undertaken by

HOC which led to its performance improvement

on supply chain efficiencies. They are improved

forecasting based on secondary sales, vendor

managed inventory and uniform (on time) and

standard (across products) product promotion

scheme.

(3) The BWE was managed by reduced skewness in

sales, more uniform off-take from the factory,

warehouses and distribution centres.

Table 3

Group

Volume of

sales

Demand

fluctuation

Inventory control

policy

I Low Low ROP, ROQ model

II Moderate High Circulation level

III High Low Periodic replenishment

system

MANAGING BULLWHIP EFFECT: TWO CASE STUDIES

84 Journal of Advances in Management Research vol. 5(II) pp. 77 – 87, 2008

(4) Several management initiatives such as redefin-

ing inventory norms, moving from target-based

dispatch to sales-based dispatch acted as facilita-

tors.

(5) The taming of BWE is not yet complete in HOC,

but the organization is able to get a handle on the

issues responsible for it.

(6) The basic sources of inefficiencies in supply

chain, such as information silos, inadequate

stocks, mal-distribution and inaccurate forecast-

ing are minimized.

Unique Features of SIL Implementation

(1) SIL has a well-coordinated logistics department

which minimizes the inter departmental conflicts.

(2) SIL basic strategy is convert the inventory flow to

a pull-based system.

(3) Supporting infrastructure (information system),

prioritization of service level, close monitoring

systems, batch production and judicious combi-

nation of dispatch schedule all contribute to the

operational efficiency of the logistics system.

STEP TO TAME BWE

(1) Managing BWE is predominately a strategy

initiative, not a tactical one.

(2) BWE would surface only when the manufactur-

ing set up is organized as made to stock.

(3) BWE would be minimum if the operations can be

reorganized as made to order.

(4) Taming BWE is a journey to transform the oper-

ations from manufacturing to stock to manufac-

turing to order. This journey is different, not

easy and is context dependent.

(5) The first tactical move is to convert the plan-

produce-dispatch service sequence to a pull-

system driven by demand.

(6) BWE taming needs a set of comprehensive

initiatives and systems. Single isolated efforts,

however big or significant they are, may have a

limited effect.

(7) It is much easier to tame BWE when the elements

of the supply chain are under the control of a

single management (the documented experience

of Barilla supports this).

(8) As pointed out by the original authors, the BWE

is a consequence of rational response by the

members of the supply chain. In a way the

optimal response of the individual elements is

leading the reduced efficiency of the overall

chain. This in a way brings back the control and

co-ordination issues in a supply chain to a sharp

focus.

(9) It is also useful to note that BWE can be one of

the indicators of lack of co-ordination in the

supply chain. Actually, when the co-ordination

is well managed, the ill-effects of Bull Whip

would also diminish.

CONCLUSION

In this article, we have documented the experiences of

containing BWE based on two case studies. We have

also analyzed the similarities and differences in these

two case studies. Based on this empirical analysis, we

have evolved a frame of reference to contain BWE. We

believe the work presented in this paper is complemen-

tary to the original contribution on BWE. The implemen-

tation framework needs to be strengthened by additional

case studies from a variety of situations. In this sense, this

contribution initiates research in an area, which would

help the supply chain researchers and managers to under-

stand why some companies are able to contain BWE and

others are not.

NOTE

1. While the discussion presented in this section is based

on real life experience, the name of the company is

changed to protect the business interest of the organiz-

ation.

REFERENCES

Kamath, V. (2005). “ERP at Marico”, Presentation made in

37th ORSI Annual Convention, Indian Institute of Man-

agement, Ahmedabad, 8-11 January.

Lee, H.L., Padmanabhan, V., and Whang, S. (1997a). “Infor-

mation distortion in a supply chain: the Bullwhip effect”,

Management Science, 43 (4), pp. 546-558.

Lee, H.L., Padmanabhan, V., and Whang, S. (1997b). “The

bullwhip effect in supply chains”, Sloan Management

Review, 38 (3), Spring, pp. 93-102.

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