However, as they examined the distributor's orders, the degree of variability increased.
When they further looked at P&G's orders of materials to their suppliers, they discovered that the swings were even greater. While consumers --- babies --- used diapers at a steady rate, the demand order variabilities in the supply chain were amplified as they moved up the supply chain.
One way to avoid inaccuracies is by reducing the lack of demand visibility by providing access to point of sale (POS) data.
However, as they examined the distributors’ orders, the executives were surprised by the degree of variability.When they looked at P&G’s orders of materials to their suppliers, such as 3M, they discovered that the swings were even greater.This effect was observed by executives of Procter and Gamble (P&G).Sales patterns for one of their best-selling products, Pampers, fluctuated in retail stores but the variabilities were not excessive.What happens when a supply chain is plagued with a bullwhip effect that distorts its demand information as it is transmitted up the chain?
In the past, without being able to see the sales of its products at the distribution channel stage, HP had to rely on the sales orders from the resellers to make product forecasts, plan capacity, control inventory, and schedule production.The authors suggest several ways in which companies can counteract the bullwhip effect. Companies can make demand data from downstream available upstream.Or they can bypass the downstream site by selling directly to the consumer.The order that the manufacturer receives is often much larger than what the actual customer's demand is, at the point of sale.This irregularity or variance in the size of the orders placed, increases as we move up the supply chain, i.e.Sources of variability can be demand variability, quality problems, strikes, plant fires, etc.