3. The example of the bullwhip effect shown in Table 7.4 shows how a simple 5 per cent reduction in demand at the end of a supply chain causes fluctuations that increase in severity the further back an operation is placed in the chain.

a) Using the same logic and the same rules (i.e. all operations keep one period’s inventory), what would the effect on the chain be if demand fluctuated period by period between

100 and 95???? That is, period 1 has a demand of 100, period 2 has a demand of 95, period 3 a demand of 100, period 4 a demand of 95, and so on????

b) What happens if all operations in the supply chain decide to keep only half of the period’s demand as inventory????

c) Find examples of how supply chains try to reduce this bullwhip effect.

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Table 7.5 Four outsourced components for Super Cycles Cost (as a proportion Suppliers Component of total material cost) The inner tubes 3% Many alternative suppliers Frame tubing 15% Carbon-fibre stem and bars 32% 'Groupset' gearing 35% system Only one supplier capa- ble at the moment; could take a long time to devel- op a new supplier Relatively large number of available suppliers Few suppliers who are capable of manufacturing these components to sufficient quality Ease of changing supplier Very easy; could do it in days Difficult in the short term, possible in the longer term Relatively easy; would probably take a few weeks for new contract Complex to source; could switch supplier in the lon- ger term but would pose quality risk