Part I. Bullwhip Effect 1. Explain what the Bullwhip Effect is. (5points) Turban(2004) defined “bullwhip effect” as large fluctuation in inventories along uncoordinated supply chain that result from small fluctuation in the demand for finished goods. Actually this concept is saying, the whole industry supply chain is likened to a whip, and the customer is holding the end of whip. As customer consumption behavior changing, the whole whip will shake, which leads the whip swing. The whole industry chain has become very unstable. The wave (fluctuation) becomes larger and larger from the end customers, retailer, Wholesalers to Manufacturers.

2. Explain why Volvo manufacturing department believed that consumers had started to like green cars in the mid-1990s. (5points) Since the manufacturing department does not know that sales and marketing offered attractive special deals to customers. It only noticed the sales rose, which shows as a sign that customer change behavior because they like this product. In fact, they bought it since it is a good deal. Lack of communication between each group would lead to bullwhip effect.

3. (1) Discuss how the Bullwhip Effect can be reduced in general and (2) how IT (Information Technology) can be used to reduce the Bullwhip Effect. (10points) • Improve communication along the supply chain by some tools, e.g., Point-of-sale data collection, electronic data interchange, and vendor-managed inventories. Make sure information are transferred and shared completely. • Shorten the cycle time, which will cut supply chain fluctuation and lower costs. • Set up an order batching to meet the changes of demand. • Stabilize the price of product, which reduce the changing of customer behavior. • Predict the sales based on the past. Allocate the demand among consumers base