Removing bullwhip from the Tesco supply chain

Abstract

We demonstrate how bullwhip reduction principles generated through generic supply chain modelling have been used to tackle the bullwhip problem within Tesco, the largest UK grocery retailer. In the context of bullwhip research, this bridging between theory and practice has not been extensively demonstrated previously. The research involved examining the automated store ordering system, through which seven replenishment algorithms were identified. We demonstrated that three of these algorithms (accounting for 65% of the sales value) were deemed to generate excessive bullwhip and could be altered to avoid such practice. Their essential structure also reflected an Order-Up-To policy. A simulation model of the system was developed and, based on experience from generic bullwhip research, order variability was reduced to approximately 75% of sales variability while maintaining customer service levels. The change was implemented by the retailer, producing significant economic benefits in line with the suggested model.

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