Determination of when a little bullwhip may be helpful
Abstract
Conventional thinking suggests bullwhip should be minimised within the supply chain. One step to achieving this is producing in a batch size of one. Achieving this given capacity constraints and performance objectives is often unrealistic. Production should be based on small batches and rapid changeovers. This introduces some bullwhip into the supply chain but, managed effectively, can actually be useful. We call this useful bullwhip Maximum Reasonable Bullwhip (MRB). Variable supply and demand makes inventory management a balancing act, where a Minimum Reasonable Inventory (MRI) level is needed. This paper aims to establish relationships between batching policies, MRB and MRI in a multi-product scenario. This is applied, demonstrating how different approaches to inventory management are combined within an organisation. While some extra bullwhip is induced within one supply chain, the other sees higher inventory holding. However, overall performance objectives across the product range are satisfied.