The effects of the lack of coordination within the supply chain
Author:Prof. univ. dr. Carmen Balan
JEL:M100, M31
DOI:
Keywords:bullwhip effect, logistics, supply chain, coordination, information
distortion
Abstract:
The present article refers to the bullwhip effect that negatively influences
the supply chain performance. This effect is experienced by various industries,
from fast moving consumer goods to IT products. The consequences for the supply
chain members are the following: increased costs, lower profitability, longer lead
times and lower product availability. The main factors that generate this effect are
the types of incentives provided by suppliers to the downstream customers, the
information distortion, the order placing practices, the pricing policies encouraging
the forward buying and the specific behavior of the supply chain members focused
on local optimization. The only way in which supply chain members may eradicate
the bullwhip effect is to enhance coordination among the subsequent stages. Some
of the strategies to be considered are the alignment of goals and objectives, data
sharing among members, single stage control of replenishment, strategies for the
improvement of the operational performance, stabilizing orders with appropriate
pricing strategies and building strategic partnerships and trust.
The incidence and amplitude of the bullwhip effect may be reduced by
strategies and decisions that are harmonized along the stages of the supply chain.
The key words in the endeavor to diminish the bullwhip effect are cooperation,
coordination, communication and trust.