Operations management - the bullwhip effect in the supply chain

IF: THEN (all else equal, it is likely that):

a) We aim to increase “inventory velocity” We must produce and push
work-in-process faster to next operation/ wait and produce only what is
pulled by next operation. Explain Why

b) We install an expensive machine that requires The intensity of the
“bull whip” in the supply chain

very large production batches but it is fast will increase / decease /
not be affected. Explain Why

c) We consolidate inventories from two (nearby) “Service level”
will increase / decrease/ not be affected warehouses into one warehouse
(keeping the same Explain Why

amount of inventory)

a) In ““inventory velocity”, the goal is to bypass storage by
keeping inventory in motion (pipeline flow).

Hence, a push-pull (a la Kanban System, for example), would work to keep
inventory in motion throughout the supply chain.

b) “Order batching” contributes to larger demand fluctuations
further up the supply chain. (Additionally, “order batching” is one
of the four causes of the “bullwhip effect” (the other three causes:
demand forecast updating, price fluctuation, rationing & shortage
gaming).

As such, the intensity of the “bullwhip effect” will increase in the
supply chain.

c) Inventory consolidation in one warehouse, instead of two, means that
order fulfillment now is done from one location, rather than two.

Assuming that the inventory are MTS (made to stock), then the service
level is the percent of units that are immediately available from stock.
Then it’s logical for the service level to increase



A plant makes four different models of DeskJet printers. Up to now, it
has been producing each model only once every week (for example, Model A
on Mondays, Model B on Tuesdays and part of Wednesdays, Model C on
Wednesdays and Thursdays, and Model D on Fridays). There is a proposal
to move from weekly to daily schedule and produce some of each model
every day. Total weekly production output would be the same.
Changeover times and costs (from one model to another) are
insignificant.

A. Would this change reduce or increase:

The level of inventory of printers in the supply chain after the plant?
Why?

The level of “work in process” inventory in the plant (i.e., number
of printers being assembled)? Why?

The intensity of the “bull whip” in the entire supply chain? Why?

a) There would be no change in the level of inventory of printers in the
supply chain after the plan change. Why? Because the question above
clearly states “total weekly production output would be the same”
[after the two proposed changes to the plant].

b) The level of “work in process” inventory in the plant will
increase. Why? Because there are now more parts moving through the
pipeline since we’ve now changed to producing some of each model every
day, and moved from a weekly to a daily schedule.

c) There are 4 factors that can cause the “bullwhip effect”: demand
forecast updating, order batching, price fluctuation, rationing &
shortage gaming. Neither of the 2 changes proposed match either of the 4
causes of the “bullwhip effect”.