Bullwhip Effect in Supply Chain

Supply Chain Class Module 2, Lesson 3 Question #1 Develop a small group consensus on the impact (increases, decreases, no effect) of the Bullwhip Effect on two of the following six supply chain performance measures: manufacturing cost, inventory cost, replenishment lead time, transportation cost, shipping and receiving cost, level of product availability profitability. One of the two measures that your team chooses must be inventory cost. For inventory costs, be certain to be specific about the kinds of inventory costs impacted (in-storage cycle stock carrying costs, ordering costs, stockout costs, or safety stock carrying costs). Clearly explain your group’s reasoning or rationale for the impact you have agreed to; that is carefully explain why the bullwhip effect either increases, decreases of has no effect on the given performance measure. In each of your explanations, drill down into the factors that drive each measure, explaining how those factors are affected by the Bullwhip effect.

MANUFACTURING COSTS
It is the consensus of Team 10 that the bullwhip effect increases costs associated with the manufacturing of products. We know that the bullwhip effect results in an amplification of the variation of product and material demand as one travels upstream in the supply chain from consumer to material suppliers. In most cases the manufacturer of products will be removed from the actual consumer by multiple layers in the supply chain. The variation in demand (variation in orders) that the manufacturer will experience will be significantly greater than the variation in demand from the actual consumers. There are several costs incurred in the manufacturing of products. Among these costs are direct material costs, direct labor costs and overhead costs. The increased variability in quantity of products demanded from the manufacturer has an impact on each of these items.
For most manufactured products, the cost of materials is a