Case Study of Logistics: Procter & Gamble —— Cure of Bullwhip Effect

Procter & Gamble (P & amp； G) When studying the market demand of "diapers", it is found that the retail volume of this product is quite stable with little fluctuation. However, when investigating the orders in the distribution center, it was found that the volatility increased obviously. The distribution center said that they placed orders according to the needs of aggregated sellers. After further research, Procter & Gamble found that retailers often set an objective order quantity based on the prediction of historical sales and actual sales. However, in order to ensure that this order quantity can be put in place in time and adapt to the incremental changes of customer demand, they usually increase the forecast order quantity and order from wholesalers. In the same way, wholesalers will also add a certain increment to the sales center on the basis of summarizing the order quantity of retailers. In this way, although there is no big fluctuation in customer demand, the order quantity has been amplified by retailers and wholesalers.

In the process of supply chain operation, many manufacturing enterprises often find that the customer demand of this commodity is relatively stable and has little change, but the upstream suppliers often maintain a higher inventory level than the downstream suppliers. In the supply chain, the demand fluctuates more upstream, which is the "bullwhip effect" in the supply chain.

First, avoid long-term demand forecasting.

Under normal circumstances, each member in the supply chain transmits forecast information through their plans. Of course, the demand input of downstream members is generated by the demand forecast of other downstream members. The remedy of consumption data duplication in supply chain is to determine the unified demand parameters from downstream to upstream if possible. An effective way is to share information between upstream and downstream, and the upstream should try to obtain the demand information of the downstream movement process.

For example, in the American computer industry, manufacturers need sales data from distributors' central warehouses. Although these data are not completely equal to the point-of-sale (POS) data, manufacturers regard these data as an important measure to keep in touch with distributors, which can narrow the demand forecast difference between upstream and downstream of the supply chain.

Second, strengthen inventory management.

Avoiding manual processing of relevant data in the supply chain is an effective way for upstream enterprises to obtain the real demand information of their downstream enterprises. IBM, Hewlett-Packard, Apple and other companies. In the cooperation agreement, the distributor is explicitly required to feedback the products of the central warehouse of the retailer. Although these data are not as comprehensive as the data of retailers' point of sale, it is still much better than losing the information about the goods after sending them out.

Using modern information technology such as electronic data interchange (EDI) is also an important way to solve the "bullwhip effect". For example, Dell has formed an efficient information network through Internet/Intranet, telephone and fax, which can be transmitted to Dell Information Center when the order is generated, and the information center will decompose the order into subtasks. Distribute them to regional centers through the Internet and inter-enterprise information networks, assemble them according to Dell electronic orders, and deliver them on time according to the schedule, so that ordering, manufacturing and supply can be completed in one stop, effectively preventing the bullwhip effect.

Joint inventory management strategy is an advanced method to share inventory responsibility reasonably and prevent demand variation and amplification. In the inventory environment managed by the supplier, the seller's large inventory does not need advance payment, which will not increase the pressure of capital turnover. On the contrary, a large amount of inventory will also play the role of financing, improve rate of return on capital, and even restrain suppliers. Therefore, it will greatly increase the demand for orders and increase the risk of suppliers. Joint inventory management is a risk-sharing inventory management model, which is modified to balance the rights and responsibilities of suppliers and sellers. It establishes a reasonable sharing mechanism of inventory cost, transportation cost and competitive inventory loss between suppliers and sellers, and transforms all the responsibilities of suppliers into part of the responsibilities of sellers, so that both parties bear the costs and risks and enjoy the benefits, which is conducive to the balance of costs, risks and benefits, and also effectively inhibits the "bullwhip"

Third, eliminate the unreasonable shortage game phenomenon.

When the supplier is faced with shortage, the product is not distributed according to the order, but the order is quantitatively distributed in proportion. For example, General Motors of the United States has adopted this distribution method for a long time in the case of shortage of goods. When consumers have no supplier information, the "game" phenomenon of shortage reaches its peak. Fully enjoying the production capacity and inventory information will help to alleviate consumers' anxiety and ultimately reduce the demand in the game. However, when there is a real shortage and the capacity information is insufficient, manufacturers can sign orders with consumers in the peak season in advance, so as to better adjust the capacity and arrange the production time. In addition, because the generous reward policy given by manufacturers to retailers has expanded the game phenomenon, retailers will continue to expand demand and cancel orders with impunity, so it is necessary to implement more severe policies and measures to cancel orders, which is also conducive to alleviating the bullwhip effect.

Fourth, the upfront payment period

Arranging logistics distribution in advance according to the payment ratio is a good way to eliminate the false high order quantity, because this method only refers to the initial reservation quantity, and the specific supply is linked to payment, which ensures the double-loop management of order and distribution. The specific method of advance payment period is to divide the accounting period into several periods, and pay once at the end of each period (if a month is divided into three or four periods, each period is 10 day or 7 days), and give price concessions to those who voluntarily repay before the end of the period.

V. Implementing joint channels

In the supply chain, in addition to information sharing, it is necessary to strengthen the organic integration of pricing, transportation, inventory planning and ownership between upstream and downstream, and establish a priority cooperation mechanism, such as establishing a unified inventory control system.

To sum up, the bullwhip effect in the supply chain is caused by "reasonable decision-making". People can take measures to alleviate it by fully understanding its causes. Of course, in order to further eliminate its influence, we must continue to implement management innovation.