Flostock News #22
The Bullwhip
- Bullwhip
The Bullwhip is an effect in supply chains where the variation in demand is larger upstream than downstream. The Bullwhip costs the European semi-conductor industry millions of euros, the supply chains containing semiconductors hundreds of million euros and the European process industry billions of euros, due to underutilized factories followed by a shortage of supply. The concept was first described by Jay Forrester in Industrial Dynamics (1961) and was therefore also known as the Forrester effect. Since the oscillating pattern looks like a cracking whip, it was renamed the Bullwhip effect.
The Semiconductor industry is notoriously volatile
- Semiconductor supply chains
The semiconductor industry is going through extreme exponential growth, driven by Moore’s Law and an insatiable appetite for electronics. The semiconductor market undergoes a volatility that is ten times higher than the volatility of the gross domestic product of the world economy. Flostock has experience in the semiconductor industry through a large project in 2013 at ASML, the Dutch producer of lithography machines for chip production that keeps Moore’s law going.
European innovation program H2020
- Europe’s Factory of the Future program
The Consortium has requested European subsidy under the Factory of the Future program which is part of the Horizon 2020 initiative of the European Commission to stimulate innovation, science and industrial leadership. If we succeed in reducing the bullwhip with 50%, the benefits to the semiconductor industry and its customers will be large. Estimates range in billions of euros per year and hundred thousands of jobs. Parties delivering the solutions will dissipate their findings broadly in the industry, so other industries will be able to benefit as well.
Partners
- Partners.
Besides Flostock, the consortium includes the following technical partners: the P&SCM group from the Technical University of Münich who analyze, model and optimize decision problems in production and supply chains, MangoGem SA, a provider of software tools for complex manufacturing and supply chain management, modelling, scheduling and optimization, Inchainge BV, provider of supply chain simulations and serious gaming in 30 countries, and Integrated Supply Chain Ltd, a global organizer of conferences around supply chain processes. Each of these partners has different ideas about the solution for the bullwhip, which in the consortium will be worked out and tested for the best solution(s). The cooperation between these partners looks promising already before the start.