Baby Farmers is an organic local food company that specifically produces fresh, pre-made meals for infants and toddlers. Their customer segment is serving busy working parents who want to buy prepared, healthy meals for their young children. They are currently selling primarily in Cambridge, Massachusetts, but hope to expand to other markets.

The company is selling 4 products as meal packages at a local retailer store in Kendal Square. The prepared meals include: Product 1 (Seafood Combo), Product 2 (Toast Chicken and Grilled veggies), Product 3 (Asian Fusion) and Product 4 (Chef Special Pasta).

Their supply chain flow is as follows: 1. Customers purchase products at local retailer store; 2. The retailer orders products from the local distributor. 3. The local distributor orders products from the manufacturer (Baby Farmers).

They have noticed significant variability in their supply chain upstream and have hired you as a consultant to help them study what they understand is the “bullwhip effect”. They know what it is but want you to help them figure out how to understand it. You are given a 10 day forecast of customer demands, as well as, retailer and distributor order pattern.

Here are a few key things to notice:

• The forecast of customer demand of four products in a period of 10 business days has been provided in customer demand and order pattern table. When measuring the bullwhip effect, you need to sum the demand for the 4 products up as the total customer demand in each day.
• The retailer orders from the distributor using total customer demand every week Tuesday and Friday, which means day 2, 5, 7, 10. Order pattern is provided in the table.
• The distributor orders every week on Friday, which means day 5 and 10. Order pattern is provided in the table.
• The inventory management team follows a base stock policy.

Here is preview of customers demand and order pattern:

Table 1: Customer Demand (Units per day) and Order Pattern

Day	Product 1	Product 2	Product 3	Product 4	Retailer Order Pattern	Distributor Order Pattern
1 (Mon)	110	99	97	77	0	0
2 (Tue)	91	102	100	93	1	0
3 (Wed)	96	97	93	80	0	0
4 (Thu)	104	95	93	99	0	0
5 (Fri)	96	94	86	101	1	1
6 (Mon)	109	103	90	117	0	0
7 (Tue)	109	112	106	102	1	0
8 (Wed)	101	79	98	116	0	0
9 (Thu)	102	103	113	95	0	0
10 (Fri)	96	99	86	104	1	1

 

Q:What is the size of the Bullwhip effect for the retailer?

Q:What is the size of the Bullwhip effect for the Distributor? ( Note: In this case, customer for distributor is retailer).

 

In the next quarter, the CEO Beverly wants to focus on the freshness of the product. Instead of the current order frequency, the retailer will order daily from distributor and the distributor will order every week on Tuesday and Friday, which means day 2, 5, 7, 10. How will this approach impact the scale of the bullwhip effect?

Hint: there should not be any extra calculations for this question, the distributor is now following same order pattern as retailer did earlier. Can you use the results from part 1 smartly?

Answer rating: 100% (QA)

To calculate the bullwhip effect we need to use the formula Bullwhip effect Variance of retailer orders Variance of customer demand For the retailer T... View the full answer