Bullwhip Measure – Sample Paper

The bullwhip effect is a measure that is used to get the demand amplifications within the supply chain. The effect is mostly seen through the static effect of demand that is observed from the customers’ side. However, the resulting effect that the manufacturers and the suppliers experience show that there is an amplified demand variation.

The bullwhip measure for the retailer will be calculated as follows: (mean out = 2000)

First get the variance of the sample data

X                     X – u               (X-u) 2

100                  -1900               -3610000

100                  -1900               -3610000

200                  -1800               -3240000

200                  -1800               -3240000

300                  -1700               -2890000

300                  -1700               -2890000

400                  -1600               -2560000

400                  -1600 -2560000

24600000

Mean in (1000)

X                     X-u                  (X-u) 2

600                  -400                 160000

1400                400 160000

320000

Variance (Out) = 24600000/ 7 = 3514285.7142

Standard deviation = √3514285.7142

Sd = 1874.6428

Cout = 1874.6428/ 2000 = 0.9373

Variance (in) = 320000/2 = 160000

Standard deviation = √160000 = 400

Cin = 400/1000 = 0.4

Bullwhip measure for Retailer

0.9373/0.4

=2.34325

Conclusion

Economies of scale have an impact on the bullwhip, in that the productions costs are expected to fall as the number of units produced increases. Since the demand from the customers is high, the manufacturer is expected to produce more of the products. The direct consequence is that the increase in the production capacity will result in a reduction in the prices of the products.

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