Concept explainers
Videos
a)
To calculate: The bullwhip measure of the retailer.
Introduction:
a)
Answer to Problem 6P
The bullwhip measure of the retailer is 2.5.
Explanation of Solution
Given information:
Formula:
Calculation of bullwhip measure for retailer:
(1)
The bullwhip measure of the retailer is calculated by dividing the variance of order with the variance of demand. 500 is divided by 200, which gives 2.5 as the bullwhip measure for the retailer.
Hence, the bullwhip measure for the retailer is 2.5
b)
To calculate: The bullwhip measure of the wholesaler.
b)
Answer to Problem 6P
The bullwhip measure of the wholesaler is 1.2.
Explanation of Solution
Given information:
Formula:
Calculation of the bullwhip measure for the wholesaler:
The bullwhip measure for the wholesaler is calculated by dividing the variance of order with the variance of demand. 600 is divided by 500, which gives 1.2 as the bullwhip measure for the wholesaler.
Hence, the bullwhip measure for the wholesaler is 1.2.
c)
To calculate: The bullwhip measure of the distributor.
c)
Answer to Problem 6P
The bullwhip measure of the distributor is 1.25.
Explanation of Solution
Given information:
Formula:
Calculation of the bullwhip measure for the distributor:
The bullwhip measure for the distributor is calculated by dividing the variance of order with the variance of demand. 750 is divided by 600, which gives 1.25 as the bullwhip measure for the distributor.
Hence, the bullwhip measure for the distributor is 1.25.
d)
To calculate: The bullwhip measure of the manufacturer.
d)
Answer to Problem 6P
The bullwhip measure of the manufacturer is 1.8.
Explanation of Solution
Given information:
Formula:
Calculation of the bullwhip measure for the manufacturer:
The bullwhip measure for the manufacturer is calculated by dividing the variance of order with the variance of demand. 1350 is divided by 750, which gives 1.8 as the bullwhip measure for the manufacturer.
Hence, the bullwhip measure for the manufacturer is 1.8
e)
To determine: Which firm exhibits the highest bullwhip effect in the supply chain.
e)
Answer to Problem 6P
The retailer exhibits the highest bullwhip effect in the supply chain.
Explanation of Solution
Given information:
On comparing equations (1), (2), (3) & (4), it can be inferred that retailers have the highest bullwhip effect.
Hence, the retailer exhibits the highest bullwhip effect in the supply chain.
Want to see more full solutions like this?
Chapter 11 Solutions
Pearson eText Principles of Operations Management: Sustainability and Supply Chain Management -- Instant Access (Pearson+)
- Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?arrow_forwardThe chapter presented various approaches for the control of inventory investment. Discuss three additional approaches not included that might involve supply chain managers.arrow_forwardConsider a three-firm supply chain consisting of a retailer, manufacturer, and supplier. The retailer's demand over an 8-week period was 90 units each of the first 2 weeks, 220 units each of the second 2 weeks, 280 units each of the third 2 weeks, and 400 units each of the fourth 2 weeks. The following table presents the orders placed by each firm in the supply chain. Notice, as is often the case in supply chains due to economies of scale, that total units are the same in each case, but firms further up the supply chain (away from the retailer) place larger, less frequent, orders. Week Retailer Manufacturer Supplier1 90 180 6202 90 0 03 220 440 04 220 0 05 280 560 1,3606 280 0 07 400 800 08 400 0 0 a) What is the bullwhip measure for the retailer? The bullwhip measure for the retailer is ??? (Enter your response rounded to two decimal places.) b) What is the bullwhip measure for the…arrow_forward
- Consider a three-firm supply chain consisting of a retailer, manufacturer, and supplier. The retailer's demand over an 8-week period was 110 units each of the first 2 weeks, 220 units each of the second 2 weeks, 280 units each of the third 2 weeks, and 400 units each of the fourth 2 weeks. The following table presents the orders placed by each firm in the supply chain. Notice, as is often the case in supply chains due to economies of scale, that total units are the same in each case, but firms further up the supply chain (away from the retailer) place larger, lessfrequent, orders. Week Retailer Manufacturer Supplier 1 110 220 660 2 110 3 220 440 4 220 5 280 560 1360 6 280 7 400 800 8…arrow_forwardConsider a three-firm supply chain consisting of a retailer, manufacturer, and supplier. The retailer's demand over an 8-week period was 110 units each of the first 2 weeks, 190 units each of the second 2 weeks, 310 units each of the third 2 weeks, and 400 units each of the fourth 2 weeks. The following table presents the orders placed by each firm in the supply chain. Notice, as is often the case in supply chains due to economies of scale, that total units are the same in each case, but firms further up the supply chain (away from the retailer) place larger, lessfrequent, orders. WEEK RETAILER MANUFACTURER SUPPLIER 1 110 220 600 2 110 3 190 380 4 190 5 310 620 1420 6 310 7 400 800 8 400 a) What is the bullwhip measure for the retailer? The bullwhip measure for the retailer is ______. (Enter your response rounded to two decimal places.) b) What is the bullwhip measure for the manufacturer? The bullwhip measure for the…arrow_forwardWeek 1 2 3 4 5 6 7 8 Retailer 110 110 190 190 310 310 410 410 Manufacturer 220 380 620 820 Supplier 600 1,440arrow_forward
- The value chain incorporates: Select one: of O a. distinct divisions between entities in the supply chain. O b. the concept of vertical integration. O c. channels of distribution that reach the ultimate customer.arrow_forwardABC analysis divides on-hand inventory into threeclasses, based on:a) unit price.b) the number of units on hand.c) annual demand.d) annual dollar values.arrow_forwardIf the company in #8 uses exponential smoothing (smoothing factor = .6) and the forecast for the year is the figure they use for EOQ calculations, calculate the EOQ using the following information: The cost of ordering and carrying cost % are the same as #7 Cost of ordering: $25 Carrying costs: 45% Starting with 2018, Forecast the 2020 demand using exponential smoothing and then use that forecast as the annual demand. year sales 2017 1,000,000 2018 1,200,000 2019 2,000,000 2020arrow_forward
- Southern Markets, Inc., is considering the use of ABC analysis to focus on the most critical SKUs in its inventory. Currently, there are approximately 20,000 different SKUs with a total dollar usage of $10,000,000 per year.a. What would you expect to be the number of SKUs and the total annual dollar usage for A items, B items, and C items at Southern Markets, Inc.?350 PART 2 Managing Customer Demandb. The following table provides a random sample of the unit values and annual demands of eight SKUs. Categorize these SKUs as A, B, and C items.SKU Code Unit Value Demand (Units)A104 $2.10 2,500D205 $2.50 30X104 $0.85 350U404 $0.25 250L205 $4.75 20S104…arrow_forwardCalculate the inventory management system's criteria for ongoing research and evaluation.arrow_forwardOne of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently being assembled at your plant. The supplier has bid $0.10 per part, given a forecast you provided of 400,000 parts in one year1. 500,000 in year 2; 700,000 in year 3. shipping and handling of parts from the supplier’s factory is estimated at $0.01 per unit. Additional inventory handling charges should amount to $0.006 per unit. Finally, administrative costs are estimated at $30 per month. Although your plant can continue producing the part, the plant would need to invest in another molding machine, which would cost $20,000. Direct materials can be purchased for $0.06 per unit. Direct labor is estimated at $0.05 per unit plus a 50% surcharge for benefits and, indirect labor is estimated at $0.008 per unit plus 50% benefit. Up-front engineering and design costs will amount to $40,000. Finally, management has insisted that overhead be allocated if the parts are made in-house at a rate of 100%…arrow_forward
Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning