Planning nervousness in a demand supply network: an empirical study

Planning processes along a demand supply network in an environment characterized by rapid market fluctuations and product changes are studied. The relationship between demand planning and the bullwhip effect is investigated by comparing planning accuracy in different demand supply network echelons and locating where there is most nervousness.

The current demand supply planning process flow was described based on interviews with key decision‐makers throughout the demand‐supply network from retailers to second tier suppliers. A data analysis of the quality of plans for demand and supply was generated in each decision‐making point by collecting planning and actual data of two products.

The results show that planning accuracy varies between the parties in the supply chain. The connection between planning nervousness and the bullwhip was investigated in detail through a vendor‐managed inventory (VMI) model in the chain. Planning nervousness causes bullwhip, as the changes in demand were amplified in the used information sharing process in VMI. In product introduction phase, the phenomenon was emphasized.

To stabilize and simplify planning the process should be differentiated according to product life‐cycle phases. One proposal is to improve communication practices with suppliers, especially to stabilize demand information sharing with VMI‐suppliers.

The structure of the electronics supply chain makes planning processes challenging. In this research we were able to follow the data flow and planning process throughout the supply chain, which is not often the case.