Bullwhip Effect - Pampers

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The orders of pampers diapers arrived in a very random way to P & G. However, in this period, the consumption of diapers on the market was regular. There were not significant peaks of births to explain these important fluctuations. Furthermore, Pampers is the best-seller of P & G, what means that the consumption was regular and the production should also be regular.

By studying the case, the managers noticed that the resellers as Wall-Mart, did not have important fluctuations, because each reseller were selling the same amount of diapers every day. However, for the wholesalers’ companies between the resellers and the plant, they were huge oscillations.

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How explain these oscillations?

Why there was a gap between consumers’ needs and the needs for production?

There was a lack of communication and coordination between the actors in the chain, which caused a poor flow of information. The demand no longer corresponded to real market demand. Indeed, the orders that P&G received from its distributors were more variable than orders from retailers. Indeed, Procter & Gamble has decided to increase the level of its inventories, which has increased manufacturing and warehousing costs.

But the available stock could not always meet the demand which resulted in long replenishment delays for P & G and its suppliers.

With the high fluctuations of the orders, P & G could not provide all the orders from distributors and retailers in time.

It was important for P & G to act because irregular production had generated losses for the company and could harm the trust of the partners.

- What steps did P & G to reduce the impact of the bullwhip effect?

- The delivery delays which have a direct impact on the raw material. Because of the overestimate of the needs of the wholesaler. It’s how about how the retailer manage the fluctuations in demand. P&G manage the bullwhip effect by the control of the supply and demand for the entire chain. Every information are transmit to the entire supply chain. In that way, the raw material order go down and reducing lead times and demand forecasting fluctuations

- Standardization ordering terms: They encourage customers to max a order of a mix of products to fill the truck in the maximum instead make a small order each time. And they used discount for distributors that ordered the maximum of volume. The company also took control of the delivery so it could spread over the course of the week.

- Limitation of the price fluctuation: P&G want to go against the natural price drop and went to an everyday low price strategy.

- Reduction of the estimations trust. To manage the fake demand of the anticipation of the retailer. So they share information about capacity with retailers. This lessens their need for shortage gaming.

Today, in order to be reactive and prevent the Bullwhip effect, P&G has adopted a solution allowing full electronic connectivity of business partners: The Axway gateway. With more than 200 partners, P&G needed an automated, flexible and high-performance B2B solution to meet the increasing demands of reliability, flexibility, visibility and control of the origin of orders.