How should supply chain enterprises cope with the epidemic?

Press Release : March 17, 2020
How should supply chain enterprises cope with the epidemic?

The novel coronavirus pneumonia principle is also called the “acceleration of demand mutation”. The classical effect of supply chain has been reversed during the outbreak of the new crown pneumonia, and the so-called “reverse” bullwhip effect has emerged. What is the reverse bullwhip effect in epidemic situation? What is the cause of adverse bullwhip effect? How to deal with the adverse “bullwhip effect” in epidemic situation? Feng Tianjun, professor and doctoral supervisor of the Department of management science, School of management, Fudan University, explained the Countermeasures of enterprises in the supply chain around the “reverse” bullwhip effect in the epidemic.

The basic idea of “bullwhip effect” is that when each node enterprise of the supply chain makes production or supply decisions only according to the demand information from its neighboring subordinate enterprises, the authenticity of demand information will go up the supply chain, resulting in the phenomenon of gradual amplification. When it reaches the source supplier, the demand information it obtains and the customer demand information in the actual consumption market occur Great deviation, the demand variation coefficient is much larger than that of distributors and retailers. Due to this demand amplification effect, upstream suppliers tend to maintain a higher inventory level than downstream suppliers. This phenomenon reflects the asynchronous demand in the supply chain. It shows a common phenomenon in the supply chain inventory management: “what we see is not real.”

Feng Tianjun said that the reverse “bullwhip effect” is that the more downstream the supply chain, the more volatile the manufacturer’s production plan and pricing, which mainly comes from many factors such as people flow, logistics, information flow, shortage game, etc. For example, in terms of people flow, due to local policies and traffic problems, employees can’t come out, and they don’t want to come out at present because of fear or because of salary support. In addition, there is a problem of isolation period when the employees return to work, and the employees return to work facing the problem of renting houses, and the landlords are unwilling to rent houses because of fear of responsibility.

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