Minimum reasonable inventory and the bullwhip effect in an automotive enterprise; a “Foresight Vehicle” demonstrator

Demand amplification, or the bullwhip effect, has been identified as contributing to increased uncertainty in the supply chain and hence poor performance in terms of increased costs, protracted lead-times and poor customer service levels. This paper shows the application of a simulation based improvement activity focussing on the ordering decisions within a supply chain. An example of a preliminary business diagnostic and subsequent redesign in a four-tier automotive supply chain is presented including value-volume analysis, variability-volume analysis, part clustering and service level – stocking profiles. Specific improvements of up to 5 to 1 in stock holding are realized for continued customer service levels.