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Bullwhip Effect and Knowledge Sharing

Bullwhip Effect

The bullwhip effect is a name used to describe situations in which a prediction negatively affects the efficiency of the supply chain. It was first described by Jay Forester in 1961. The amplitude of a bullwhip in motion often resembles the effect that forecasts can have on supply chains. Changes in sales are sometimes seen as changes in demand of the product and even a small change in sales may lead to the impression that a large change in demand occurred. Forecasts are unavoidable due to the constant changes in demands, but errors in forecasting are also relatively common, which results in the bullwhip effect occurring. It may happen due to human factors such as mismanagement, panic, confusion, and other negative emotions that prevent rational thought.

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The presented article shows that effective knowledge sharing may be used to prevent bullwhip effects. When companies share information about the market demand, they allow each other to create more accurate forecasts. Their forecasts later result in the lesser occurrence of errors, and subsequently lesser bullwhip effect. The article states that stock-outs and overstocks can be avoided through this practice, which shows the direct relation of the bullwhip effect to inaccurate forecasts of customer demand. Such issues can be highly problematic for small companies, and if it is possible to gain a knowledge sharing partnership with other companies in the field, it could prevent issues such as bankruptcy and unfulfilled demand for products. Knowledge sharing can be a valuable tool (Myers and Cheung 70).

Knowledge Sharing

One of the most recent examples of knowledge sharing can be seen in the partnership of Matsushidra and Matsushidra Inc. and Ford Motor Company. Both are automotive companies with a major stake in the market, but both are also experiencing difficulties in various aspects of the business. Ford’s situation is especially dire to the point of possible reduction of the company and closure of its foreign offices in India and other underperforming countries. On the other hand, Matsushidra is experiencing a relative success, but have very steep competition in the SUV segment of the automotive market. These companies previously partnered in 1995, which brought success to both, and the recent alliance is likely to be positive as well due to knowledge sharing between them (Kumar). As the provided article states, knowledge sharing is beneficial to both partners as they become able to create more accurate plans for the future (Myers and Cheung 70). This event is worth sharing because it might be used as an inspiration for other automotive manufacturers who are struggling in the market. The automotive industry is in a long transitional process at the moment. Electric cars are beginning to become viable for both sport and consumer purposes, high-tech solutions are expected to be present in the majority of vehicles, and completely new types of cars, such as self-driving automobiles, are becoming a reality. These changes may be too complex for already established companies, but through knowledge sharing, they may adapt to the new technologically dependent environment.

Works Cited

Kumar, Deepak. “Mahindra-Ford’s Latest Alliance Seems to Be a 1995 Redux.” The Financial Express, 2018. Web.

Myers, Matthew, and Mee-Shew Cheung. “Sharing Global Supply Chain Knowledge.” MIT Sloan Management Review, vol. 49, no. 4, 2008, pp. 67–73.

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