The Bullwhip Effect or How To Prepare When You Don’t Know What You’re Preparing For
If you also face logistics challenges click here to see our 8 Key challenges summary. There is a centuries-old saying belonging to Sun Tzu that goes like “The line between disorder and order lies in logistics”. We don’t know precisely what the famous general and military strategist was facing at that time. Still, right
There is a centuries-old saying belonging to Sun Tzu that goes like “The line between disorder and order lies in logistics”. We don’t know precisely what the famous general and military strategist was facing at that time. Still, right now we’re looking at a seemingly never-ending Coronavirus pandemic which threw a lot of our world’s known order into disarray.
In mid-March, reports showed that the British had already stockpiled over £1bn-worth of food. That was quite worrying, as the British Retail Consortium Chief Executive made a public appearance to reassure the consumers that there was enough food in the supply chain.
So, why the big worry? Every small variation in consumer demand can have a hugely disproportionate impact on inventory and upstream product demand. It is what many call the bullwhip effect. One flicker of the small bullwhip’s handle and the already scared and angry bull will burst into a violent, destructive run.
At the time of the Coronavirus outbreak, the supply chains were in grave need of a major reconfiguration. They had to go back to the drawing board and think of a new way of catering for the big demand increases in online and convenience stores.
However, although there has been a massive rise in short-term demand from online retail for the logistics sector, much of its business was still dependent on retail. So, every blow that the retail sector felt reverberated in the logistics market.
So, what’s next for logistics.
The challenges for logistics in the UK are quite severe, and we’re going to expand on that in the following weeks.
The demand amplification phenomenon nicknamed the bullwhip effect is not new. Supply chain professionals have been aware of it for some time. However, in the context of the Coronavirus pandemic, the consequences were greater than expected. The unprecedented levels of consumer demand for some products ahead of the UK Government lockdown sent shocks throughout a whole lot of food supply chains.
This brisk reconfiguration of the supply chains following the COVID-19 turbulences left us with a crystal-clear conclusion. The sector is still highly dependent on retail. Move a few bricks in the retail department, and the logistics will suffer as well.
Also, let’s not forget the airfreight industry, which is under heavy fire since its capacity has been reduced to almost nought, and it is unlikely to return in the short to medium term. Many will not survive, but those who will, will probably win more share of the market, but there will be a smaller market, so that’s also a double-edged sword.
UK manufacturers are still struggling. However, the latest short-term figures of HIS Markit/ CIPS UK Manufacturing purchasing managers index shows some signs of improvement and much-needed stability for the future.