Budo’s saying goes: “A single speck of dust in the eye can make the three worlds look very narrow; liberate your mind and life without obstruction! ” Although the meaning of these words can be interpreted quite freely, their essence undoubtedly boils down to making decisions based on information that is not blurred.
Operation in the supply chain is based on the exchange of information with our partners, i.e. customers and suppliers. However, how often (not) do we share our demand forecasts and inventory projections looking forward blindfolded and thus making suboptimal decisions?
The Bullwhip effect, well known in logistics, has its source mainly in the absence of providing up-to-date information from the downstream of the supply chain upwards. As a result, decisions are based on the analysis of outdated and deformed demand signals. This leads to out-of-stock situations in one product groups and at the same time overstock in other groups throughout the entire supply chain. All partners operating in the supply chain lose money due to lower sales and rising costs. As a result, they become less competitive and begin to lose the market share.
To significantly reduce this imperfection, simply increase the frequency of generating forecasts and analysis of future inventory projections, while communicating your needs you’re your partners in the supply chain.
The accuracy of forecasts and inventory projections can be further increased by providing each other with information on future promotions, participation in sales-stimulating events, etc. Any such information removes another speck of dust from your eye and allows better decision making.