campbell and Bullwhip Effects

Campbell and Bullwhip Effects



After changing into the CPR system, Campbell has received substantial benefits from it. Owing to CPR system, information flow tends to be more efficient and effective across the supply chain. The first and foremost payoff is that sharing information helps flatten the fluctuation on demand. Obvious variance on demand is caused by traditional pricing strategy and promotions, as noted in Exhibit 1, and it would be further amplified as when passing through the supply chain. This causal fluctuation is categorized as bullwhip effect. By communicating information in an effective environment and a timely fashion, Campbell can monitor the inventory level for downstream wholesalers and help them manage products mix. As a result, wholesalers can reduce their overall inventory and to avoid stock out to a larger extent. Subsequently, inventory holding costs would decline dramatically, let alone the freed warehouse space that will enable the wholesalers to increase their product diversification. Meanwhile, steadier demand also enables Campbell to schedule its production more easily. Order congestion will be avoided when manufacturer knows what and how many products its customer really need and when they need them. The manufacturer would thus have a shorter lead-time during production, along with foreseeable savings on overtime expenses. Also the manufacturer is able to free up some capacity from unnecessary orders, which usually incur some setup costs. Consequently, Campbell’s service level is increased. A better service drives to greater customer satisfaction and ergo greater sales in the long run. In addition, elimination of peak promotional volumes allows transportation scheduling to be more consistent. The manufacturer can thus optimize truck loading and vehicle routing because of more effective information sharing.

To achieve these benefits, both the manufacturer and wholesalers need to make some organizational changes. On one hand, wholesales should build the trust to the manufacturer by sharing their sales information, or even the decision process the wholesalers use to make orders. Also buyers are required to have a different skill set to facilitate information flow. For instance buyers are supposed to have more proficient in computer-based data analysis, rather than traditional communication and interpersonal skills. The functionality of procurement and sales department should be updated. On the other hand, it is necessary for Campbell to invest time and money for the purpose of developing a proper system for effective information sharing. As the benefits are mainly from the consistent collection of data and subsequent analysis, development of the system and processes may require Campbell to form a dedicated project team to complete said work. Since the sale of the manufacturer is largely affected by the information flowing