• Subject Name : Management

Countering the Dreaded Supply Chain Bullwhip Effect in a COVID-19 World

  1. The sudden rise of coronavirus pandemic across the world has created a massive negative impact on businesses, communities, and establishments drastically. The supply chain of products and services are largely affected due to rapid rise in demand and supply of goods and services leading to sky-rocketed demand of consumers amid Covid 19 pandemic (Handfield, Graham and Burns, 2020). With the event of coronavirus epidemic, it has revealed that companies concerning of every industry need to involve new potential suppliers promptly to open additional sales channels to meet the rapidly growing demand and retain as competitive in the market. It has been recognised that the countries which are heavily affected by the coronavirus pandemic such as China, America, and Italy, have restricted incoming and outgoing of trade which in turn has caused a huge interruption in the supply chain (Rajasekharan, 2020). Besides that, the demand of customers has created by the global pandemic has caused massive bullwhip effects which have led to volatile and unbalanced production and supply chain. The concept of bullwhip effect can be defined as a distribution channel trend in which the demand forecasts harvest the inefficiencies of the supply chain (Cao, Xiao and Sun, 2016). In other words, the bullwhip effect occurs mainly on the supply chain when there are changes in demand of consumers which in turn inclines the organizations to order more goods and meet the new demands of the consumers effectively (Braz, De Mello, de Vasconcelos Gomes and de Souza Nascimento, 2018). Concerning to such facts, the bullwhip effect typically flows up the supply chain, initiating with the retailer, wholesaler, distributor, producer, and next to the supplier of raw materials (Cao, Xiao and Sun, 2016). This relates to the current and prevailing situation of coronavirus pandemic across the world. More and more people are under lockdown and due to transport and supply chain restrictions, consumers are facing a hard time and thus requiring more goods than usual (Ivanov, 2020). An example can be described by assuming if one buys 100 rolls of toilet paper, then the stock of such retailer will rapidly go down as a single customer has bought 100 rolls at once (Granato, 2020).

It has been recognized or assumed by consumers’ that the stocks have shortages or companies are out of stock, but the reality is there are no shortages in any section of the supply chain, not even in raw materials. The main intention of consumer buying more than enough good such as 100 rolls or 200 rolls of toilet paper as they overbuy them so that they do not have to buy them again for the next 6 months or more. This happens in events such as global pandemic like Coronavirus, national emergency, war, or in case of lockdowns and transport restrictions. Moreover, since there is no shortage of stock of toiler paper, when they are back in stocks, the demand for toilet paper will drop as consumers have already stocked up. As stated in the case study, the global coronavirus pandemic has made business organizations rethink about their supply chain efficiencies to meet high and aggressive customer demands for any products or service effectively (Handfield, Graham and Burns, 2020). The same situation of bullwhip effect that occurred amid the coronavirus pandemic in the events of a national strike, lockdowns, recession, and when the price of the particular product declines at a reasonable rate or discount. These events make buyers or consumers overbuy products with the perception of being safeguard from being out of stock and which in turn affects the supply chain inventory and makes a whip to the supply chain distribution channels (Cao, Xiao and Sun, 2016). Relating to the example of toilet paper, if a consumer buys 100 rolls at once, then he/she is making the stock empty and inclines towards wholesalers and manufacturers to send more goods to meet the next consumers demand effectively (Granato, 2020). It signals or makes whip to the supply chain inventory concerning the toiler paper rolls to deliver more goods and placing them to shelves so that consumer demands never gets out of stock. Also, to persist competitive within the rivalry market amid events like coronavirus pandemic and ensure supply chain management effectiveness (Granato, 2020).

  1. Similarly, as per the case of toilet paper, there are many commodities or products which consumers tend to overbuy during the events of emergency of any global health disease outbreak. Concerning such fact, the two other commodities apart from toilet papers which have witnessed an event of panic buying during the current coronavirus pandemic are groceries and sanitizers. As identified in the case of Hong Kong, where the consumer is been witnessed in stealing toilet papers due to panic and fear of being out of stock as people are consuming more as compared to usual times (Yeung, 2020). The news report by Yeung (2020) in CNN, has also stated that two armed men had stile 600 rolls of toilet paper due to the fear of coronavirus and shortages of stocks as business and production are stopped for an unpredicted time. This indicates that the panic buying behaviour and the tendency of consumers’ can adversely create the bullwhip effect on the supply chain inventory of particular products which are of prime need and want. Grocery items such as cereals, bread, milk, sugar, detergents, and cooking oil are the key commodities which are of prime necessity of consumers which they require in their daily lives and for survival amid the events like coronavirus outbreak (Cao, Xiao and Sun, 2016). In addition, another commodity which consumer are needing massively is sanitizers to clean their hands and body to ensure virus free and cleanliness at the same time. Amid the coronavirus pandemic and advice by the WHO (World Health Organization), people of several countries across the world are keen towards buying sanitizers to adheres to the guidelines and ensure health safety effectively. This had made a sharp toll on the rise of demand for sanitizers throughout the globe, especially in developed countries like the USA, China, UK, India, Brazil, and others. Since these commodities are crucial for their basic and health needs, the bullwhip effect can probably be expected in such cases as well alike the case of toilet paper. The signifies that the two commodities are of great need by the people, so people will likely buy more in panic and due to the fear of coronavirus outbreak and unexpected opening of regular markets, the consumer will tend to buy in bulk.

To justify this prospect, the supply chain inventory of the two commodities; grocery and sanitizers will be affected due to the sky-rocketed demand of consumer during the pandemic like Covid 19. Besides that, as the stocks in shelves of supermarkets or hypermarkets will end, the wholesalers and manufacturers will be informed or signalled to supply a greater number of goods to fill up the stocks and ensure meeting consumer demands effectively. On the other hand, it is of the obvious fact that grocery items are fast consuming goods that people need daily or weekly, thus, amid transport restrictions and city lockdowns, people fear of stores being shut and stocks getting out of stock (Granato, 2020). This is the main reason why consumers overbuy in panic amid emergencies like virus pandemic, war, or declaration of national emergency within the country.

  1. Amid situations like coronavirus pandemic or wars between nations creates a heavy panic and fear among people concerning purchases of good and materials which are of prime need and necessity at the same time. Effective supply chain management of companies ensure that they meet customers’ demands effectively in terms of promptness and quantity (Handfield, Graham and Burns, 2020). Concerning the sudden events of emergency and panic such as war or disease pandemic, companies should start realizing the bullwhip effect and make strategic decision and practices to ensure effectiveness in eradicating such scenarios effectively (Granato, 2020). Besides that, gone are days when the traditional approach of supply chain inventory management used to be the standard procedure of managing supply chain process; however, with changing business needs and demands of consumers, flexibility towards change is essential for companies (Handfield, Graham and Burns, 2020). According to the case study, by using real-time inventory information to wholesaler, manufacturers, and raw materials suppliers; and the shipment information, companies can effectively reduce the risk of interruption while moving more inventory at an expectable volume (Granato, 2020). In addition, the narrative of the case study also indicates that, in order to evade or counter the bullwhip effect in the supply chain of a company, a system of precise and real-time information will be an effective approach to ensure effectiveness. Overall, by educating the team members involved in supply chain management on the roots of the bullwhip effect, adopting partnered supply chain networks, building trusts across supply chain partners, and gaining understanding on partner processes shall help prevent bullwhip effect scenarios. Thus, by implementing such practices within the supply chain management by companies can effectively avoid any occurrence of bullwhip effect in events like coronavirus pandemic (Granato, 2020).

References for The Bullwhip Effect in Closed-Loop Supply Chains

Braz, A., De Mello, A., de Vasconcelos Gomes, L. and de Souza Nascimento, P., 2018. The bullwhip effect in closed-loop supply chains: A systematic literature review. Journal of Cleaner Production, 202, pp.376-389.

Cao, B., Xiao, Z. and Sun, J., 2016. A study of the bullwhip effect in supply- and demand-driven supply chain. Journal of Industrial and Production Engineering, 34(2), pp.124-134.

Granato, R., 2020. Countering the Dreaded Supply Chain Bullwhip Effect in A COVID-19 World - Supply Chain 24/7. [online] Supplychain247.com. Available at: <https://www.supplychain247.com/article/countering_the_supply_chain_bullwhip_effect_in_a_covid_19_world>

Handfield, R., Graham, G. and Burns, L., 2020. Coronavirus, tariffs, trade wars and supply chain evolutionary design. International Journal of Operations & Production Management, 1(2).

Ivanov, D., 2020. Predicting the impacts of epidemic outbreaks on global supply chains: A simulation-based analysis on the coronavirus outbreak (COVID-19/SARS-CoV-2) case. Transportation Research Part E: Logistics and Transportation Review, 136, p.101922.

Rajasekharan, M., 2020. The COVID-19 Supply Chain Impact – Avoiding The Bullwhip Effect. [online] Supply and Demand Chain Executive. Available at: <https://www.sdcexec.com/sourcing-procurement/article/21134023/cleo-the-covid19-supply-chain-impact-avoiding-the-bullwhip-effect>

Yeung, J., 2020. Thieves Stole 600 Toilet Paper Rolls in Hong Kong Amid Fears of Coronavirus Shortages. [online] CNN. Available at: <https://edition.cnn.com/2020/02/17/asia/hong-kong-toilet-roll-robbery-intl-hnk-scli/index.html>

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