Optimization of inbound value flow in a manufacturing company : A case study on the bullwhip effect

Abstract: Purpose – The purpose of the research is to explore how to reduce waste in value flows and to minimize the bullwhip effect within operations. To fulfill and answer the purpose of the research three questions of issue has been established: 1. What issues in value flows can be identified, regarding inbound and outbound flows? 2. How can issues in value flows be minimized, with regards to inbound and outbound flows? 3. How can a model be created to understand the relationship between value flow improvements and the bullwhip effect? Method – To retrieve understanding of the topic that thesis involves, support of literature studies, observations and data collection was used. The literature study created a foundation of theoretical framework. The data collected from the case company formed a base that partly facilitates the purpose of this thesis. The theoretical framework and data collection were thoroughly analyzed and discussed in order to propose solutions for improvements. Findings – The research establishes different issues that can be identified in outbound and inbound flows such as; waste in transportation, waste in inventory, waste in movement and waste in overproduction. Further, in order to minimize the identified issues in inbound and outbound flows it is imperative to find out the root cause for the issues. When the root cause was established, statistical approach was utilized to further explain the issue. The findings from the statistical approach elucidated a large variance between supply and demand, resulting in a bullwhip effect. In order to minimize the bullwhip effect, improvements should focus on insufficiencies such as; lack of communication, order batching and disorganization. In addition, standardization through 5s approach mitigates the waste in transportation and movement. To understand the relationship between value flow improvements and the bullwhip effect, a causal loop diagram was created to understand the phenomenon from a system perspective. Implications – The research contributes with solutions on how to identify the bullwhip effect as well as highlighting the issues in value flows. Furthermore, this research solidifies the importance of using lean process to improve overall productivity in value flows. Limitations – The research was limited to one case company and one area in the case company. The answers that are presented in this research could increase the reliability and credibility if the authors had been able to investigate several areas at the case company or several companies. Furthermore, the date that has been retrieved is based solely on one supplier at the case company. Keywords – ‘Lean Process’, ‘Bullwhip Effect’, ‘Supply Chain Management’, ‘Continuous Improvement’, ‘System Perspective’ and ‘Statistical Analysis’.