Abstract
The bullwhip effect is how the speed of supply chains can cause a self-perpetuating problem: as suppliers take longer to deliver goods, they have to speed up their deliveries to keep up with demand. This makes it even harder for customers to find what they want on time because suppliers compete for delivery slots (Kim & Shin, 2019).
However, supply chain partners understand the importance of implementing CPRF. It can be implemented in various supply chain domains, including customer loyalty programs, asset management, and relationship management. As with any good initiative, it requires a considerable commitment from company management and employees. While many companies have gone through the CPRF process already, some still have not decided they are on board with this initiative.
Introduction
When it comes to supply chain management, the bullwhip effect is a concept that describes how suppliers can affect the prices of goods sold in their industry. It is an economic term that describes how prices change based on demand and supply (Kim & Shin, 2019). The bullwhip effect can have negative consequences for businesses because it means that companies have to pay more for goods than they would otherwise be able to, leading to profit losses and decreased competitiveness.
Addressing the Bullwhip Effect
How the Implementation of CPRF Between Supply Chain Partners Can Reduce the Bullwhip Effect
To avoid this situation, companies need to implement effective supply chain management strategies to help them create efficiencies in their supply chains while reducing costs. They should combine these strategies with lean manufacturing techniques or just-in-time inventory management systems to reduce transportation and storage waste while keeping costs down.
Collaboration
One way that companies can implement these strategies is by working with other organizations within their supply chains. This will enable them to share data about demand patterns and ensure all parts of the supply chain contribute equally to production costs rather than one party taking advantage of others (Lee, 2021).
CPRF Agreement
Another way to reduce the bullwhip effect is by implementing CPRF agreements between supply chain partners. These agreements set up a transparent process for communication between parties during times of crisis, which helps ensure that both customers and suppliers are informed about changes in production and delivery plans. This creates an open dialogue between all parties, which helps minimize confusion and maximize efficiency during times of crisis. By implementing these agreements, companies can significantly reduce their exposure to unexpected costs due to supply chain disruptions. They will be better prepared if those disruptions happen again.
Supply Chain Performance Metrics That Would Be Improved After the Implementation of CPRF
Supply chain performance metrics are essential for companies to track, but many fail to measure them. Implementing the CPRF between supply chain partners can significantly reduce this negative effect by allowing them to share information about their performance metrics and how they compare with other supply chains. This can lead to more accurate data about how the supply chains are performing and allow them to make better decisions about the most effective initiatives to improve their performance metrics.
Supply Chain Lead Time
Supply chain lead time is the first metric that would be improved by implementing best practices. Lead times are when one places an order and when they receive it, usually measured in days (Lee, 2021). When orders arrive late, they can cause problems with quality and lead to increased costs and dissatisfied customers who may not purchase future products.
Inventory Levels
Inventory levels are the second metric that would be improved (Lee, 2021). Inventory levels can impact the ability to fulfill customer orders and ensure enough parts are available to build products before customers start asking for them again, so the customer experience is not affected.
Conclusion
In conclusion, the bullwhip effect is a well-known phenomenon that creates a plot twist in supply chain performance. This situation can occur when some suppliers in a supply chain have no or negative price elasticity, which causes unreasonable prices for some products and suboptimal usage of scarce resources. It shows up in numerous supply chain domains and is often cited as something that can induce false positives in supplier performance measurement.
Although supply chain experts suggest that the bullwhip effect is overhyped, research shows that, in some cases, the bullwhip can be very real (Kim & Shin, 2019). Still, softening its effects through CPRF between supply chain partners is possible. Therefore, one successful way to mitigate this effect would be by diligently implementing CPRF between supply chain partners.
References
Kim, J. S., & Shin, N. (2019). The impact of blockchain technology application on supply chain partnership and performance. Sustainability, 11(21), 6181. Web.
Lee, R. (2021). The effect of supply chain management strategy on operational and financial performance. Sustainability, 13(9), 5138. Web.