Managing Bullwhip Effect in Acoustic Guitar Manufacturing: A Case Study Through Vendor Managed Inventory (VMI) Approach

Abstract

The Bullwhip Effect is a condition where differences arise between the supply and demand numbers within supply chain management. This acoustic guitar manufacturing faces challenges resulting from demand fluctuations, supply chain complexities, and inventory inefficiencies, which often lead to the Bullwhip Effect. The company experiences fluctuations in both demand and supply, consequently leading to inventory accumulation in its warehouses. This study aims to reduce the Bullwhip Effect score in acoustic guitar manufacturing by implementing the Vendor Managed Inventory (VMI) method. VMI acts as a regulatory mechanism during distribution, ensuring better control over dispatched products by incorporating forecasting techniques such as single exponential smoothing, double exponential smoothing, and linear regression. Before implementing VMI, the Bullwhip Effect scores were 1.42 for Retailer 1 and 1.69 for Retailer 2. After the successful implementation of VMI, significant reductions in the Bullwhip Effect scores were observed, with scores of 0.48 and 0.91 recorded for Retailer 1 and Retailer 2, respectively.

Keywords

• bullwhip effect
• vendor managed inventory (vmi)
• forecasting
• inventory