Sunday, 6 May 2012

Bullwhip effect

According to Wikipedia, the bullwhip effect is.

The bullwhip effect (or whiplash effect) is an observed phenomenon in forecast-driven distribution channels. It refers to a trend of larger and larger swings in inventory in response to changes in demand, as one looks at firms further back in the supply chain for a product. The concept first appeared in Jay Forrester'sIndustrial Dynamics (1961) and thus it is also known as the Forrester effect. Since the oscillating demand magnification upstream a supply chain is reminiscent of a cracking whip, it became known as the bullwhip effect.

I am not a supply chain expert, but I find the bullwhip effect interesting because of its obvious links to chaos theory and the unpredictable behaviour of complex systems.

Essentially, inventory problems arise with supply chains due to inaccurate or incomplete information. Small errors grow very rapidly into serious supply chain problems. A demand-driven supply chain based on good IT systems is more stable than one where forecasting is used.

It seems to me that climate scientists have something to learn here, because many billions and possibly trillions of dollars are being spent solely on the basis of climate forecasting. Somehow climate scientists have supposedly resolved their own version of the bullwhip effect in their climate models. Somehow the rapid growth of uncertainty from small errors doesn't happen inside their computer models. Somehow they are able to forecast up to thirty years and more into the future.


Obviously they have achieved no such thing. Instead of solving the problems that have insulated themselves from consequences. These lucky, publicly-funded climate scientists are not in the same position as supply chain managers. It doesn't matter if their models don't actually work - they have politics, propaganda and the BBC to deal with that. No bullwhip effect for them - oh deary me no. Their customers just have to buy whatever bullshit is lobbed their way.

We really ought to pause and reflect on a world where supply chain managers have a far better understanding of complex systems than even our most distinguished climate scientists. Maybe all climate scientists should do some real work with genuine responsibility before being given the keys to the ivory tower.  


James Higham said...

Don't think they're listening, AKH.

A K Haart said...

James - it's still off limits for many.