Question: Using examples of post-pandemic demand and supply shocks and labour shortages, discuss THREE behavioural causes of the bullwhip effect in a chosen industry and propose actionable mitigation strategies.
26 Oct 2022,12:03 AM
You are employed as a logistics strategy consultant for a top consultancy firm in the UK and you have been asked to prepare a 3000-word management report. The report should to address ONE of the following questions using the background information provided below and the concepts you have learned from week 1 to week 5 of the SCM course unit. The report should provide clear and actionable managerial recommendations.
Background
A recent survey of the world’s leading contract manufacturers (e.g., Foxconn), chipmakers (e.g., Intel Corp), circuit board makers and other technology industry players, showed that 80% of key players were having trouble finding workers and over two-thirds were experiencing rising labour costs across their supply chains. The industry is also facing a global chip shortage that started in 2020 and is estimated to persist until the second half of 2022. Over 90% of the companies surveyed reported rising materials costs, and 88% noted that production lead times were up by two months and expected to increase. British car production dropped by 27% year on year in August as a lack of semiconductors and led to a big drop in the number of vehicles exported to Australia, the US and China. Volkswagen, Ford and Opel maker Stellantis have announced temporary closures of facilities in Germany because of the chip problem. This all began with minor variabilities in consumer demand signals due to the pandemic. First, consumer spending slowed down. Then, a few months later, demand for gadgets rose unexpectedly as people set up home offices. Equipment manufacturers responded by increasing semiconductor orders, which rippled up the supply chain and overwhelmed the few chip foundries that manufacture virtually all the world’s computer chips. Overall, the surge of post-pandemic consumer demand, resulted in supply side backlogs, and transport and labour shortages, which have impacted most critical supply chains like food, pharmaceuticals and energy in a similar way.
Energy shortages provide a clear illustration of the problem. The recent petrol shortages in the UK and the rationing of power in northern China have been linked to labour shortages and both countries not holding enough safety stock reserves amid a global surge in demand for oil and gas, which doubled in price to about $80 a barrel in the last 12 months. The Drewry’s shipping index, which measures the cost of shipping containers globally, shows that compared to a year ago, shipping costs are up by 291% and on busy transport routes like China to Europe’s biggest port in Rotterdam, container shipping costs rose nearly sixfold in one year. The labour shortages and the resulting bullwhip effect in global supply chains have also caused delays in last-mile deliveries and increased warehousing costs. Data from leading commercial property agencies in the UK show that the total amount of warehousing space leased in 2021 was 46.9 million sq ft, representing a 27% year on year increase from 2020. This puts the UK industrial and logistics sectors at risk of unprecedented levels of warehouse demand as last-mile logistics operators, parcel carriers, supermarkets and retailers have been competing fiercely for suitable warehouse spaces in an undersupplied market for the past 18 months. Many companies are now investing in warehouse expansion plans as warehouse spaces that meet size, location, and specification requirements (e.g., cold warehouses) are scarce due to high levels of uptake, increasing construction costs and material production and transport lead times.
Question 2
Using examples of post-pandemic demand and supply shocks and labour shortages, discuss THREE behavioural causes of the bullwhip effect in a chosen industry and propose actionable mitigation strategies.
Expert answer
1. One behavioural cause of the bullwhip effect is overestimating demand. Companies may stockpile inventory in anticipation of future demand, only to find that the demand never materialises. This can lead to disruptions in the supply chain and ultimately higher prices for consumers.
2. Another behavioural cause of the bullwhip effect is herd behaviour. When consumers see that a product is in high demand, they may be more likely to purchase it, even if they don't actually need it. This can create artificial shortages and drive up prices.
3. Finally, information asymmetry can also contribute to the bullwhip effect. If some members of the supply chain have access to information that others do not, this can lead to decisions being made that are not in the best interests of the entire chain. For example, a retailer may order more inventory than is necessary, in order to get a better price from the supplier.
There are various mitigation strategies that can be employed to reduce the impact of the bullwhip effect. For example, companies can use data analytics to more accurately forecast demand. They can also implement policies to encourage customers to purchase only what they need, and to discourage hoarding. Finally, information asymmetry can be reduced by increasing transparency and communication among all members of the supply chain.
1. One behavioural cause of the bullwhip effect is overestimating demand. Companies may stockpile inventory in anticipation of future demand, only to find that the demand never materialises. This can lead to disruptions in the supply chain and ultimately higher prices for consumers. 2. Another behavioural cause of the bullwhip effect is herd behaviour. When consumers see that a product is in high demand, they may be more likely to purchase it, even if they don't actually need it. This can create artificial shortages and drive up prices. 3. Finally, information asymmetry can also contribute to the bullwhip effect. If some members of the supply chain have access to information that others do not, this can lead to decisions being made that are not in the best interests of the entire chain. For example, a retailer may order more inventory than is necessary, in order to get a better price from the supplier. There are various mitigation strategies that can be employed to reduce the impact of the bullwhip effect. For example, companies can use data analytics to more accurately forecast demand. They can also implement policies to encourage customers to purchase only what they need, and to discourage hoarding. Finally, information asymmetry can be reduced by increasing transparency and communication among all members of the supply chain. 1. One behavioural cause of the bullwhip effect is overestimating demand. Companies may stockpile inventory in anticipation of future demand, only to find that the demand never materialises. This can lead to disruptions in the supply chain and ultimately higher prices for consumers. 2. Another behavioural cause of the bullwhip effect is herd behaviour. When consumers see that a product is in high demand, they may be more likely to purchase it, even if they don't actually need it. This can create artificial shortages and drive up prices. 3. Finally, information asymmetry can also contribute to the bullwhip effect. If some members of the supply chain have access to information that others do not, this can lead to decisions being made that are not in the best interests of the entire chain. For example, a retailer may order more inventory than is necessary, in order to get a better price from the supplier. There are various mitigation strategies that can be employed to reduce the impact of the bullwhip effect. For example, companies can use data analytics to more accurately forecast demand. They can also implement policies to encourage customers to purchase only what they need, and to discourage hoarding. Finally, information asymmetry can be reduced by increasing transparency and communication among all members of the supply chain.
1. One behavioural cause of the bullwhip effect is overestimating demand. Companies may stockpile inventory in anticipation of future demand, only to find that the demand never materialises. This can lead to disruptions in the supply chain and ultimately higher prices for consumers. 2. Another behavioural cause of the bullwhip effect is herd behaviour. When consumers see that a product is in high demand, they may be more likely to purchase it, even if they don't actually need it. This can create artificial shortages and drive up prices. 3. Finally, information asymmetry can also contribute to the bullwhip effect. If some members of the supply chain have access to information that others do not, this can lead to decisions being made that are not in the best interests of the entire chain. For example, a retailer may order more inventory than is necessary, in order to get a better price from the supplier. There are various mitigation strategies that can be employed to reduce the impact of the bullwhip effect. For example, companies can use data analytics to more accurately forecast demand. They can also implement policies to encourage customers to purchase only what they need, and to discourage hoarding. Finally, information asymmetry can be reduced by increasing transparency and communication among all members of the supply chain.
Stuck Looking For A Model Original Answer To This Or Any Other
Question?
Our skilled experts only need your instructions and deadline to help you produce an original and flawless paper.
Place Order Now
Customer ID: 100351