Beer Game Analysis and Supply Chain Management - Essay Example

The main probable causes of this phenomenon as seen in the graphs are inefficient policies in supply chain management, forecasting errors in consumer demands, and delays in processing information and orders. For example, if there is a lack of communication within the supply chain, or at least between the directly interacting ladders, it causes magnification in discrepancy up to the maximum level as orders move upstream to the factories. Additionally, failure to accurately forecast demand increases causes the supply chain to run out of stock and fail to safeguard inventories. Moreover, delays in processing information and orders cause either product shortages or overabundance of stock. This results in an increase in the operational costs of the teams.

2. There are several ways to correct these problems to reduce the costs of this bullwhip effect. One is the use of a supply chain management tool that allows customers to determine the inventory levels of supplying factories. This could result in an agreement between the vendors and consumers on the adequate amount of inventory based on buyer demands. This reduces the risk of inaccurate forecasting. Another way is to implement “electronic data interchange.” This allows the processing of information and orders to be done electronically, thus resolving the

SUPPLY CHAIN MANAGEMENT 3
problems on delays. Immediate transfer of purchases into the database can also be done by the implementation of “point of sale management.” This means every purchase is automatically logged and monitored by the system. This would aid in the generation of inventory and production estimates, thus minimizing out-of-stock or overabundance of supply scenarios. Another solution is avoiding price fluctuations, which happens when suppliers decrease prices to get rid of excess supplies, causing an increase in demand for that product, then again causing the prices to revert to normal, and then causing a fall in demand. This erratic movement is increased in every step of the supply chain, and with the consideration of lead times, this can easily result in out-of-stock or overabundance of supply scenarios. A supply chain management strategy of the consistent offering of low or reasonable prices is the best way to resolve this. Furthermore, developing a common database of products and supplies that can be accessed by those involved in the supply chain would allow a player to respond to variations immediately.

This is called agile manufacturing in which techniques to minimize supplies, time, and waste and developed.
3. This bullwhip effect was seen in P&G. Executives saw erratic movements in orders and supply of diapers, despite the fairly even demand from the market. Diaper use is fairly predictable despite the debate on the seasonal variation in birth rates. The seasonal variation is diminutive compared to the fluctuation and erratic movements monitored in the production rate of the company after orders were placed and passed upstream through the supply chain. P&G realized that over 5% variation in demand is caused by discount promotions because this encouraged consumers to buy more while the prices are lower than normal. In some situations, discounted prices are usually result of overabundance in supply due to inaccurate forecasting or delays in placing orders (Disney and Lambrecht, 2008, p46-8). Read More