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1 Steps taken by Procter & Gamble (P&G) to reduce the impact of the bullwhip effect and other approaches that P&G could adopted.
The bullwhip effect can be explained as ‘the phenomenon where orders to the supplier tend to have larger variance than sales to the buyer’ where ‘the distortion propagates upstream in an amplified form’ (Chiang, 2012. P: 7) or, in short, the intrinsic rise in demand fluctuation via the supply chain (Joseph and Wilck; n.d. P: 1). The bullwhip effect has been widely discussed among researchers in the supply chain field and yet no real solution has been found (Chiang, 2012). However, there are many actions that have been taken by companies in order to decrease its impact. The steps that P&G took in order to decrease the impact of the bullwhip effect are as follows:
1. P&G believed that each employee needed to forecast his demand in the supply chain because uncertain information contributes to a surfeit in safety stock, which, in turn, leads to an increase in inventory costs.
2. P&G’s suppliers, customers, and Wal-Mart had been involved in the Vendor Managed Inventory (VMI) system allowing them to see consumer demand information depending on the Point-of-sale data.
3. P&G enabled their supplier to produce an accurate plan by providing them with sales information related to Point-of-sale data.
4. According to Gartner (2002), a Consumer-driven supply network program has been established by P&G to provide an immediate link between the actual sales and the processes of the supply chain.
5. Discussing the demand plan on a monthly basis sale and managers and this will help to enhance planning for future demand (Patton; 2005).
In addition, there are other approaches, developed by researchers, that the company could adopt to reduce the bullwhip effect, as exemplified in the following list:
• Joseph& Wilck (n.d) found that good coordination between a company and their supplier can help the company to meet their consumers’ order because the company will not have orders from numerous suppliers at the same time.
• Lead time reduction between a company and their supplier via the chain can minimise the impact of the bullwhip effect (Joseph and Wilck, n.d). The lead time reduction can be achieved as agreed by Joseph and Wilck (n.d), YU et al (2001) and Lee et al (1997) over and done with high level of information sharing between a company and their supplier.
• Implementing scheduled ordering policies is another approach that could be used to reduce the impact of the bullwhip effect (Murray, 2007).

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