The Bullwhip Effect at P&G*

            


Details


Case Code : CLOM013
Publication date : 2006
Subject : Operations
Industry : FMCG
Teaching Note : Available
Length : 06 Pages
Price : Rs. 100

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Key words:

Procter & Gamble, Wal-Mart, 3M, Demand, Logistics, Supply chain, Purchase rate, Distributors, Retailers, Channel members, Replenishment, Point-Of-Sale data, Vendor-Managed Inventory, Out-of-stock rate, Just-in-time, SAP system, Supplier portal, Promotional offer, Consumer demand, Demand signaling, Inventory level

Note

* This caselet is intended for use only in class discussions.
** More comprehensive case studies are priced at Rs.200 to Rs.700 (US $5 to US $16) per copy.

 


Abstract:
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The caselet provides an insight into the concept of the bullwhip effect. It examines the reasons that led P&G to shelve its old supply chain model and revamp it to ensure supply chain efficiencies. The caselet describes the various initiatives undertaken by P&G to increase accuracy of demand forecasts. P&G also provided up-to-date information to suppliers so that they could plan their production and deliver materials on a just-in-time basis.

Issues:

   The Bullwhip Effect at Procter & Gamble
   Need to provide information on consumer demand and demand forecasts to all channel members Disadvantage of the old supply chain model at P&G
   Obstacles faced by P&G in its supply chain coordination

Introduction

Procter & Gamble (P&G), the world's leading producer of household products, markets over 300 brands to 5 billion people around the world. P&G's products fall under three broad categories, namely, beauty care; health, baby, and family care; and household care.


In the early 1990s P&G faced a problem of extreme demand variations for one of its best-selling brands - Pampers diapers. The logistics executives at P&G examined the order rates for Pampers across the supply chain. Though the purchase rate remained more or less steady at the consumer end, the logistics executives found that the variation of orders increased from the retailer level to the distributor level up the supply chain...

Questions for Discussion:

1. What steps did P&G take to reduce the impact of the bullwhip effect? In what other ways, according to you, can P&G reduce the bullwhip effect across its supply chain?

2. Coordination between the various stages of the supply chain increases overall profits and moderates the bullwhip effect. What are the basic obstacles in supply chain coordination and how can P&G ensure this coordination?