...The Effects of a Hurricane on the Principles of Supply and Demand Econ 365 Jacob Owen The principles of supply and demand state that supply is the availability of a good or service desired by a consumer. Demand is a measure of the public’s desire for that good of service. As a rule of thumb, if something is very popular, or very necessary, it generally will be in high demand. The demand for a specific good or service can literally change overnight. Case in point when a hurricane enters the Gulf of Mexico, certain products become in high demand especially along the United States Gulf coast. Sudden increases in demand can have both positive and negative results for the producer as well as the consumer. Some of the products that will suddenly go into high demand are batteries, flashlights, gasoline, gas cans, canned food etc. With this sudden increase in demand, producers will likely order and stock more of these items than they normally would. This sudden change in demand makes the usual supply decrease. This results in the suppliers having to increase their production numbers. With a sudden increase in demand and decrease in supply this sometimes leads producers to increase their prices as a result. While the price increase is sometimes necessary to handle the sudden change in demand, some produces engage in “price gouging,” that is artificially inflating prices to take advantage of the increased demand which is highly illegal. Sometimes, when a hurricane...
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...The Microeconomic Effects of Change in Demand and Supply Factors: Wal-Mart Raina Devoid Southern New Hampshire University Introduction The following research study of Wal-Mart Stores Inc. (Wal-Mart) examines the effects of non-price factors as they relate to the graphical representations of demand and supply curves. After describing the industry itself and the services/ products it provides and an understanding of how the organization operates as a market has been established, this study will give insight on the effects of four non-price demand factors have on the demand function. The non-price demand factors include consumer income, seasonal products, availability of substitutes, and population. Once this has been defined, the study will discuss the effects of the following non-price determinants on supply: technological progress, government regulation, seller expectations, and alternative products and related goods. The explanation of these changes will be as it relates to the change in the graphical representation of the supply function. Organizational Profile Wal-Mart Stores, Inc. is a publicly-traded company that offer consumers discounted prices on everyday items. It is the world’s largest retailer and is known not only for its discount stores, but also its super-centers, neighborhood markets, and club stores. “The company operates approximately 10,130 retail units under 69 different banners across 27 countries,” (Wal-Mart Stores, Inc., 2013). Whether a customer...
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...Music Piracy and its Effects on the Demand, Supply, and Prosperity of the Music Industry Abstract In an era where pop culture and technology are rapidly growing, intertwining and becoming embedded in the everyday lives of Americans, it was inevitable that their paths would cross. Possibly the most affected medium of pop culture is the music industry. The growth and development of the internet is either their biggest gift or biggest curse. Modern technology has made wide-scale trading of music possible in the form of MP3 files available over the internet for free. Users can simply upload the files to these sharing sites and millions of others at any given time have the ability to download it from them. The Recording Industry Association of America, however, doesn’t share the enthusiasm about these file sharing practices. To them, it is stealing from the record company and from the artist themselves. Consumers don’t tend to see it that way. The issue that arises here is whether or not should music be accessible for free trade over the internet. On the one hand, it is thought that MP3 downloads reduce sales of legitimate CDs. On the other hand, it can be argued that downloading free MP3s could actually encourage someone to buy a CD which they may not have purchased had they not heard it in its entirety. This is known as the sampling effect. The focus of this research paper will be to paper analyze the impact of music file sharing on the demand, supply, and prosperity of...
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...REVIEW OF SUPPLY CHAIN MANAGEMENT CONCEPTS AND THE BULLWHIP EFFECT H.M. Lai1 1Faculty of Engineering, Universiti Putra Malaysia, 43400 Serdang, Selangor, Malaysia. ahiu_mun@hotmail.com Keywords: Supply Chain Management, Bullwhip Effect, Inventory. Abstract. In recent years, the application of supply chain management in organization has become very popular. Business organizations today increasingly use the vital role of supply chain management to compete. This paper presents the basic concepts and literature review of supply chain management. The practice of supply chain management is guided by some basic underlying concepts that have not changed much over the centuries. This paper also discusses the common problem in supply chain management known as the bullwhip effect. 1. Introduction At present, the way the business is done has undergone radical transformation due to ever increasing expectations of consumers. The realization of importance of collaboration and integration among the partners has led to the idea of supply chain management. Organizations have realized the essentialness of an effective and efficient management of supply chain for present and future survival. Hence, the importance of supply chain management has grown over a period of time and plenty of planning models are now practiced by organizations across the globe. In adopting supply chain management, organizations must carry out a consistent set of management practices. 2. The Concept of Supply Chain Management...
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...MBA-FP6008: Assessment 1, Economics Problem Set 1 Dennis J. Johnson Capella University 08/12/2015 Problems A, B, and C Introduction This assessment will be an analysis of graphed data and changes in supply and demand for three economic problems. Problem A involves production possibilities for consumer and capital goods, problem B is an evaluation of changes in supply and demand equilibrium, and finally, problem C involves pricing with relevance to supply and demand. Successful completion of this assessment demonstrates proficiency in; applying theories, models, and practices of economic theory, analyzing solutions with support from relevant data, resources, references, and economic principles, analyzing graphed and circular flow diagram data, and analyzing changes in supply and demand in a competitive market. Problem A. Production Possibilities | Type of Production | Production Alternative A | Production Alternative B | Production Alternative C | Production Alternative D | Production Alternative E | Butter | 0 | 1 | 2 | 3 | 4 | Guns | 15 | 14 | 12 | 9 | 0 | Production Possibilities for Consumer Goods (Guns) and Capital Goods (Butter) 1. The specific assumptions that underlie the production possibilities curve are: that there are only two goods, consumer and capital, that they are produced in different proportions in the economy, the quantities of the resources do not change, production techniques are given and constant, and that resources are...
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...Bullwhip Effect The meaning of Bullwhip effect is not very clear when we hear just the word. But when studied the term very carefully, it provides information more about how the main manufacturer or a member of a supply chain deals with the demands of the customers by creating appropriate supplies for them. Bullwhip effect happens in two different scenarios; first, the company failed to predict the big flow of demands for their products and in turn, the demand of the customers are not met. Second, the company created more products because they had predicted that there will be more demand but in actual, the demand is very poor and in effect, the company have a lot of unsold supply stockage. When you researched in the internet about bullwhip effect, you can see various graphs of whips interweaving with each other in ascending fluctuations. That is so true. But to explain it clearly in words, bullwhip effects involves many companies that are linked together because they are suppliers/buyers of each others products because they need those products to create their whole big product. Example: Car manufacturing will purchase products from tire manufacturer, engine manufacturer, paint supplier, metals(alloy/steel/titanium) supplier, etc. If the car manufacturer needs to create 50 cars, the different suppliers (supply chain participants) will then provide the needed supplies. If by the end of the month, the company sold all the cars but the customers demands for 50 more...
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...in a supply chain for the supplier‘s performance Bachelor thesis: Organization studies, 2nd semester, academic year 2011-2012 Thesis Circle: Time will tell…. A processes perspective on inter-organizational collaboration Name: PC Jansen ANR: 770926 E-mail: P.C.Jansen@uvt.nl The importance of information sharing in a supply chain for the supplier‘s performance Abstract This literature review investigates the effect of information sharing from a buyer to a supplier in a supply chain on the performance of that supplier, with taking in mind that the supplier has to combat the bullwhip effect. With the existence of the bullwhip effect, a supplier cannot make right forecasts and therefore has difficulties in planning its production and/or inventory control. This research shows that information sharing is the key solution to reduce or avoid the bullwhip effect and, by that, it positively influences the performance of the supplier in the chain. Keywords: Bullwhip, supply chain, information sharing, supplier performance, inventory control, single-echelon, multi-echelon Thesis Circle: Time will tell…. A processes perspective on inter-organizational collaboration Supervisor: Remco Mannak Supervisor 2: Annemieke Stoppelenburg Name: PC Jansen ANR: 770926 E-mail: P.C.Jansen@uvt.nl 2 Table of contents Table of contents 3 1. Introduction 4 2. Theoretical Framework 7 2.1 Bullwhip effect 7 ...
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...of bullwhip effect According to Lee et al. (1997b) there is a phenomenon that the variance of orders may be larger than that of sales, and the distortion tends to increase as one moves upstream which is called bullwhip effect. It is a distortion in the sharing of information from downstream to upstream in the whole supply chain system; the effects can propagates the enterprise’s marketing, logistic and manufacture. Despite There are lots of factors 9 which could affect the efficiency of supply chain, like organization structure, channel of information, geographical distribution, industry characteristics etc., the bullwhip effect is still one of the most deep-rooted influence factor for the whole system. You cannot find another such kind of element like the bullwhip effect which could affect all parts of the whole supply chain system. No matter what kind of industry the firm are, what place does the firm in or how hard does the firm try by its own, the processes inside of the firm from producing plan to all kind of inventory must be all influenced by the bullwhip effect and hard to avoid. That is why the bullwhip effect is one of the most deep-rooted influence factor. QUESTION 1 (A) Discuss the term “bullwhip effect” and its causes. The bullwhip effect is a distribution channel phenomenon in which forecasts yield supply chain inefficiencies. It refers to increasing swings in inventory in response to shifts in customer demand as you move further up the supply chain. The concept...
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...DEMAND AND SUPPLY The Individual Demand Curve and the Law of Demand 1. The individual demand curve shows the relationship between the price of the good and the quantity that a consumer is willing to buy during a particular time period, holding all other variables constant. To construct a demand curve, we use the data shown in a demand schedule which contains, for each price, the quantity that a consumer is willing to buy. 2. The law of demand states that the lower the price, the higher the quantity demanded, ceteris paribus. Thus the demand curve is negatively sloped because of: a. Substitution effect: A fall in the price of the good lowers the opportunity cost of consuming it (the number of other goods you must give up), and thus consumers are likely to substitute this good for others. b. Income effect: A fall in the price means that a given amount of money will buy more of all goods; in other words, real income has increased. The consumer is likely to purchase more of this good and of other goods. 3. A change in quantity demanded refers to a movement along the demand curve and is caused ONLY by a change in price. From Individual to Market Demand 1. The market demand curve shows the relationship between the price of the good and quantity that all consumers together are willing to buy. 2. In addition to the number of buyers (population), factors other than the price of the good that determine individual demand are held constant along the...
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...raw materials, capital and energy) * How to produce: to produce a given output a firm needs to use more of one resource and less of another * Who gets the goods and services: the more of society’s goods and services you get, the less someone else gets Who makes the Decisions: * The government * A company Price Determine Allocations: * Market: an exchange mechanism that allows buyers to trade with sellers 1.2 Models Model: * a description of the relationship between two or more economic variables * can be used to predict the effect of a change of one variable Simplifications by Assumptions: * Example: Income threshold model of China to explain car purchasing behavior in China * Only the income is important Testing Theories: * Testing theories by checking whether predictions are correct Positive vs. Normative: * Positive statement: a testable hypothesis about cause and effect * Test the truth of a statement * Normative statement: a conclusion as to whether something is good or bad * About something somebody believes should happen 1.3 Uses of Microeconomics Models * Help to make predictions * Can be useful for individuals, governments and firms in making decisions * Individuals: purchasing or other decisions * Firms: which production method to maximize profit * Government:...
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...BUULLWHIP EFFECT BACKGROUND The bullwhip effect occurs when the demand is amplified in the supply chain as they move up in the channels of the supply chain of a firm. Distorted information from one end of a supply chain to the other can lead to tremendous inefficiencies. Companies can effectively counteract the bullwhip effect by thoroughly understanding its underlying causes. Procter & Gamble (P&G) introduce this term. Logistics executives at Procter & Gamble (P&G) examined the order patterns for one of their best-selling products, Pampers. Its sales at retail stores were fluctuating, but the variabilities were certainly not excessive. However, as they examined the distributors' orders, the executives were surprised by the degree of variability. When they looked at P&G's orders of materials to their suppliers, they discovered that the swings were even greater. At first glance, the variability did not make sense. While the consumers, in this case, the babies, consumed diapers at a steady rate, the demand order variability in the supply chain were amplified as they moved up the supply chain. P&G called this phenomenon the "bullwhip" effect. (In some industries, it is known as the "whiplash" or the "whipsaw" effect.) Causes of the Bullwhip Effect Researchers found out that the factors which cause the bullwhip effect are the demand forecasting and amplification of oeders to the upper level of the supply chain. The best illustration of the bullwhip effect is the well known...
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...1. Supply Chain Management The objective of supply chain management is to provide a high velocity flow of high quality, relevant information that will enable suppliers to provide an uninterrupted and precisely timed flow of materials to customers. In other worlds it would be responsible to put the right product and quantity, at the right place and at the right time. The logistic performance has a strong influence over the financial performance of the industrial companies and commercial. With the development, together with development of the information technology, among other factors, show up the possibility of supply chain managed, which is know as Supply Chain Management. It is very important to understand first the objectives of the Supply Chain Management therefore give a close up at the Bullwhip Effect and understand its causes and understand how to minimize it. 2. Bullwhip Effect Supply Chain coordination functions well as long as all stages of the chain take actions that together increase total supply chain profits. Each part of the chain should maintain its actions in a good relation to other participants and the supply chain in general and make decisions beneficial to the whole chain. If the coordination is weak or does not exist at all, a conflict of objectives appears among different participants, who try to maximize personal profits. Besides, all the relevant information for some reason can be unreachable to chain participants, or the information can get...
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...Using Supply and Demand 5 A f t e r r e a d i n g t h i s c h a p t e r, y o u s h o u l d b e a b l e t o : Show the effect of a shift in demand and supply on equilibrium price and quantity. Explain real-world events using supply and demand. Demonstrate the effect of a price ceiling and a price floor on a market. Explain the effect of taxes, tariffs, and quotas on equilibrium price and quantity. State the limitations of demand and supply analysis. State six roles of government. It is by invisible hands that we are bent and tortured worst. Nietzsche I n the last chapter we introduced you to the concepts of supply and demand. In this chapter we will (1) show you the power of supply and demand, (2) show you how the invisible hand interacts with social and political forces to change the outcome of supply and demand analysis; and (3) discuss how one must adjust supply and demand analysis with other issues kept at the back of one’s mind. THE POWER OF SUPPLY AND DEMAND To ensure that you understand the supply and demand graphs throughout the book, and can apply them, let’s go through an example. Figure 5-1(a) deals with an increase in demand. Figure 5-1(b) deals with a decrease in supply. 104 USING SUPPLY AND DEMAND s CHAPTER 5 105 Figure 5-1 (a and b) SHIFTS IN SUPPLY AND DEMAND When there is an increase in demand (the demand curve shifts outward), there is upward pressure on the price, as shown in (a). If demand increases from D0 to D1, the quantity of...
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...bullwhip effect in supply chain: Reflections after a decade” . CELS 2008, Jönköping, Sweeden. (presented by EmreEryılmaz). Note: This is the final draft version of this paper. Please cite this paper (or this final draft) as above. You can download this final draft from http://research.sabanciuniv.edu. THE BULLWHIP EFFECT IN SUPPLY CHAIN Reflections after a Decade Gürdal Ertek, Emre Eryılmaz Sabancı University, Orhanlı, Tuzla, 34956, Turkey Abstract A decade has passed since the publication of the two seminal papers by Lee, Padmanabhan and Whang (1997) that describes the “bullwhip effect” in supply chains and characterizes its underlying causes. The bullwhip phenomenon is observed in supply chains where the decisions at the subsequent stages of the supply chain are made greedily based on local information, rather than through coordination based on global information on the state of the whole chain. The first consequence of this information distortion is higher variance in purchasing 1 quantities compared to sales quantities at a particular supply chain stage. The second consequence is increasingly higher variance in order quantities and inventory levels in the upstream stages compared to their downstream stages (buyers). In this paper, we survey a decade of literature on the bullwhip effect and present the key insights reported by researchers and practitioners. We also present our reflections and share our vision of possible future. Keywords: Bullwhip Effect, Information...
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...the Bullwhip Effect Termpaper for International Logistics WS14/15 Lecturer: Christian Deckert Johannes Wolff BA13, International Business , International Trade 1132214046 Table of Contents List of Figures ii 1. Introduction 1 2. The Bullwhip Effect as a Supply Chain Phenomenon 1 2.1. Managing the Supply Chain 1 2.2. The Bullwhip Effect as Supply Chain Dynamics 2 2.3. The Bullwhip Effect as an Inevitable Consequence of Supply Relations—The Beer Game 3 2.4. The Reasons for the Bullwhip Effect 3 2.5. Studying the Bullwhip Effect in Data 5 3. Formal Analysis of the Bullwhip Effect 7 3.1. Models Based on Serially Correlated Demand 7 3.2. Measuring the Effect of Transparency 8 4. Mitigating the Bullwhip Effect 8 4.1. Information Policy 8 4.2. Reducing Lead Time 8 4.3. Collaboration of Retailers 9 5. Summary 9 References 10 Appendix 12 List of Figures Figure 1: Order fluctuations in the beer supply chain 12 1. Introduction The US-American telecommunications company CISCO depreciated 2.25 million US dollars in the third quarter of 2001 due to excess stock (Beer, 2014, p. 1). According to Beer (2014, p. 3.) the bullwhip effect is the probably most important reason for this depreciation. The bullwhip effect affects production and leads to a shortage of stocks or excess stocks, drops in sales, increases inventory costs and instability of planning (Beer, 2014, p. 3). Productivity losses due to the bullwhip effect are between 10...
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