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The 


 also known as Whiplash Effect, is a phenomenon observed in
forecast-driven distribution channels. This concept was propounded by J Forrester in his
book Industrial Dynamics and thus it is also known as the Forrester Effect. Since the
oscillating demand magnification upstream a supply chain reminds someone of a cracking
whip it became famous as the Bullwhip Effect.

a 

 
x In reality customer demand is very rarely perfectly stable.
Therefore businesses must forecast demand correctly to properly position inventory and
other resources. Forecasts are based on statistics, and they are rarely perfectly accurate.
Because forecast errors are a given, companies often carry an inventory buffer called
"safety stock". Moving up the supply chain from end-consumer to raw materials supplier,
each supply chain participant has greater observed variation in demand and thus greater
need for safety stock. In periods of rising demand, down-stream participants increase
orders. In periods of falling demand, orders fall or stop to reduce inventory. The effect is
that variations are amplified as one moves upstream in the supply chain (further from the
customer). This sequence of events is well simulated by the Beer Distribution Game which
was developed by the MIT Sloan School of Management in the 1960s.
The causes can further be divided into behavioral and operational causesx

 




Àc misuse of base-stock policies

Àc misperceptions of feedback and time delays
Àc panic ordering reactions after unmet demand
Àc perceived risk of other players' bounded rationality
º  



Àc dependent demand processing

Ãc Forecast Errors
Ãc adjustment of inventory control parameters with each demand observation
Àc ÿead time Variability (forecast error during replenishment lead time)
Àc lot-sizing/order synchronization
Ãc consolidation of demands
Ãc transaction motive
Ãc quantity discount
Àc trade promotion and forward buying
Àc anticipation of shortages
Ãc allocation rule of suppliers
Ãc shortage gaming
Ãc ÿean and JIT style management of inventories and a chase production
strategy

a  
 In addition to greater safety stocks the described effect can lead to either
inefficient production or excessive inventory as the producer needs to fulfill the demand of
its predecessor in the supply chain. This also leads to a low utilization of the distribution
channel. In spite of having safety stocks there is still the hazard of stock-outs which result
in poor customer service. Furthermore, the Bullwhip effect leads to a row of financial costs.
Next to the (financially) hard measurable consequences of poor customer services and the
damage of public image and loyalty an organization has to cope with the ramifications of
failed fulfillment which can lead to contract penalties. Moreover the hiring and dismissals of
employees to manage the demand variability induce further costs due to training and
possible pay-offs.

a     Theoretically the Bullwhip effect does not occur if all orders exactly
meet the demand of each period. This is consistent with findings of supply chain experts
who have recognized that the Bullwhip Effect is a problem in forecast-driven supply chains,
and careful management of the effect is an important goal for Supply Chain Managers.
Therefore it is necessary to extend the visibility of customer demand as far as possible. One
way to achieve this is to establish a demand-driven supply chain which reacts to actual
customer orders. In manufacturing, this concept is called Kanban.

This model has been most successfully implemented in Wal-Mart's distribution system.
Individual Wal-Mart stores transmit point-of-sale (POS) data from the cash register back to
corporate headquarters several times a day. This demand information is used to queue
shipments from the Wal-Mart distribution center to the store and from the supplier to the
Wal-Mart distribution center. The result is near-perfect visibility of customer demand and
inventory movement throughout the supply chain. Better information leads to better
inventory positioning and lower costs throughout the supply chain. Barriers to the
implementation of a demand-driven supply chain include the necessary investment in
information technology and the creation of a corporate culture of flexibility and focus on
customer demand. Another prerequisite is that all members of a supply chain recognize that
they can gain more if they act as a whole which requires trustful collaboration and
information sharing.

Some of the methods intended to reduce uncertainty, variability, and lead time are as
follows;
 Àc Vendor Managed Inventory (VMI)
Àc Just In Time replenishment (JIT)
Àc Strategic partnership
Àc Information sharing
Àc smooth the flow of products
Ãc coordinate with retailers to spread deliveries evenly
Ãc reduce minimum batch sizes
Ãc smaller and more frequent replenishments
Àc eliminate pathological incentives
Ãc every day low price policy
Ãc restrict returns and order cancellations
Ãc order allocation based on past sales instead of current size in case of
shortage.

This is a Flow Process Chart for patient bed reservation in a hospital. It depicts the flow to
enter the Medical Record Number (MRN) for bed reservation. An MRN is optional to reserve
a bed. In the past the workflow was designed in such a way that it was mandatory for the
patient to have a valid MRN to reserve a bed. If the patient did not have a valid MRN then
the present screen would have to be closed after half the entries were done and the MRN
registration screen would be opened to generate an MRN. Now, the process flow has been
improved such that if the patient does not have an MRN, an MRN registration screen would
populate and MRN can be created. Also new functionality has been added that even without
MRN a bed can be reserved.
c

The adoption of Euro IV emission standards to meet Indian emissions regulations from 2010
has become the death knell

Strict emissions regulations which come into effect by April 2010, would mandate Euro IV
compliance in major Indian cities including Delhi, Mumbai, Hyderabad and Bangalore and
2015±2016 for the remainder of the country. This would lead to Maruti 800 being phased
out in 2010.


Hypertext Transfer Protocol Secure (HTTPS) is a combination of the Hypertext Transfer
Protocol with the SSÿ/TÿS protocol to provide encryption and secure (website security
testing) identification of the server. HTTPS connections are often used for payment
transactions on the World Wide Web and for sensitive transactions in corporate information
systems. As opposed to HTTP URÿs which begin with "httpx//" and use port 80 by default,
HTTPS URÿs begin with "httpsx//" and use port 443 by default. HTTP is insecure and is
subject to man-in-the-middle and eavesdropping attacks which can let attackers gain access
to website accounts and sensitive information. HTTPS is designed to withstand such attacks
and is considered secure. This has increased the confidence in people conducting financial
and other sensitive transaction over the web and more e-business is conducted than it was
before.

Medical imaging equipments such as MRI scanners originally contained metallic ball bearings
in the system which would distort the magnetic imaging and not deliver an accurate result
to the physician. Emergence of plastic ball bearings fitted with plastic or glass balls resulted
in images no longer being distorted due to their qualities of being non-metallic and non-
magnetic.

My company was using the SW-CMM (Software Capability Maturity Model) a popular
software assessment model. It has since migrated to the software process CMMi (Capability
Maturity Model Integrated). CMMi covers the same material as SW-CMM, although some
topics are treated more extensively, which is a reflection of the engineering community¶s
knowledge acquired over the years. Coverage for elements like Risk Management and
Measurement and Analysis, for example, is crisper and more definitive than in SW-CMM.
Besides, CMMi is built on the experience gained from SW-CMM and other models, and hence
addresses the shortfalls of those models. Software companies are moving to the CMMi
model because of peer pressure and to retain their competitiveness.

The cost of implementing CMMI has not been significantly greater than SW-CMM, but the
benefits outweigh the costs. The costs of transitioning from SW-CMM is also not very
significant, particularly for my organization since we were already a successful SW-CMM
implementer.

There are numerous changes in CMMI over SW-CMM. Some of the more significant changes
are in the engineering process areas (EPA). The engineering category in CMMI has several
new process areas including requirements development, technical solution, product
integration and validation.

The benefits of EPA are well quantified in ÿ T¶s case²after the CMMI assessment the
company has been able reduce its defect rate to 0.7 defects per 1,000 lines of code as
against 6 defects per 1,000 lines of code before the CMMI assessment. ÿ T has now been
able to catch 70 percent of defects during the product inspection stage and another 30
percent during testing process, thereby reducing the product design cycle by half.

There are two methods to get CMMI assessed²staged and continuous. As a software
company the logical way for us has been to opt for the staged method. It offers a roadmap
to approach process improvement one step at a time. The staged representation prescribes
the order for each process area according to maturity levels. Achieving each ³level´ ensures
that an adequate improvement foundation has been laid for the next level, minimizing the
organization¶s process improvement investment while maximizing the benefits.

The continuous method offers a flexible approach to process improvement. This is where
system companies and product engineering companies will make use of CMMI model to the
maximum. It is designed for organizations that would like to choose a particular process
area or set of processes to improve trouble spots in the organization or processes. The
continuous method also allows an organization to improve different processes at different
rates, thereby reducing investment in assessments.c