Breaking the ‘bullwhip’ effect cycle in supply chain: Can industries unlock ‘true demand’?

Welcome to supply chain planning 2023: Lights, camera, action!

⏱️ 3-minute read 

bullwhip effect in supply chain

The ongoing energy crisis, peaking global inflation, and looming economic recession all indicate the volatile year of 2023. This will only continue strengthening consumer demand fluctuations, eventually feeding into the ‘bullwhip effect’ in your supply chain. Variations in demand cause all kinds of reactions throughout the supply chain, all in fear of missing out on the chance to supply your customers. Usually, it leads to overall increased stocks and often wrong stocks. The most recent electronics and chips overstock is just proving that and may well be the tip of the iceberg of shifts from a global shortage to a global oversupply crisis. Why do we seem to be stuck with this never-ending effect?


Bullwhip effect in supply chain: Demand vs supply imbalance

Bullwhip effect in supply chain visualized: Capacity, inventory, market performance = forecasting and demand planning, importance depending on outside worldThe world in which we operate does not stand still. We continuously experience different supply and demand pressures which put our ability at risk to service our customers on time, in full, without errors, efficiently, and at the right cost. So, how can we break this cycle? While leveraging network design and inventory optimization can address the supply pressure, the market will always drive demand variation. However, should variation in demand automatically get the connotation of being unpredictable? We believe demand forecasting is key in dealing with supply chain imbalances.


Demand drivers and demand sensing

A lot of demand planners have a good idea of what influences their demand and whether demand will go up or down. So, you know what drives demand, but it’s getting more difficult to quantify the impact of those drivers. And even if this weren’t an issue, a forecast still remains an assumption for the future. Sensing what could happen in short term and then connecting this to effective supply decisions completes the loop.

How Driver-based forecasting can help remove bullwhip effect in your supply chain: internal plan, external drivers, forecastAlthough getting all three elements in place will have the biggest impact, why not start with the quick win: your real demand drivers. We aim at decoupling three things: The internal plan, the external drivers, and the forecast. While the organization focuses on improving the right data, the forecast engine will deliver the connected volume forecast based on continuous learning from the data. Let’s stop asking the organization to improve the forecast and let’s start asking them to improve their data. With the right machine using this data, the volume forecast will automatically outperform your current results.


Introducing EyeOn driver-based forecasting

As part of EyeOn’s demand management approach, we believe developing driver-based forecasting is an essential step for every company.

benefits of reducing bullwhip effect in supply chain
EyeOn’s driver based forecasting connects the different demand drivers into an integrated forecast model that continuously learns and connects the forecast to the driver information. We have the expertise and experience to take the bias out of your forecast, increase accuracy with a positive effect on supply, and free up time for all workforces involved in planning activities. We are only satisfied when we have enabled you to take more fact-based, forecast-driven decisions. 

How to get started with driver-based forecasting:

  • Do you have the basic qualitative sales data? Share it with us and we validate the potential.
  • Curious about the potential of driver-based forecasting for your business? Get in contact with us for a proof-of-concept!
  • Or join us at one of our live events and learn more.
Erik De Vos
Erik De Vos, business consultant at EyeOn

Are you ready to take the first step in breaking the ‘bullwhip effect’ cycle in your supply chain? Please feel free to contact our expert Erik De Vos to discuss driver-based forecasting and explore your situation.

Remember to keep an eye on this page where we will address further supply chain challenges you will be facing this year.


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