Question

Explain under which circumstances a bullwhip effect may be experienced by EMU, our university.

Answer 1

Bullwhip effect on the supply chain occurs when changes in consumer demand causes the companies in a supply chain to order more goods/resources to meet the new demand and finally due to sudden change in consumer demand there are lots of inventories left and other inefficiencies.

Circumstance 1

Bullwhip effect can be faced by EMU in situations like EMU has organized its promotional event and is marketing the courses offered tremendously throughout the city and state. Then there will be sudden influx of student joining the EMU for admission and to cope with the demand EMU will built more classroom facilities and hire more teachers and faculties for that course. But unfortunately, if the students do not like the courses and start to drop out then there might be a spread of negative mouth of words and very few or no students might join those courses in future in EMU and as a result there will be sudden change in demand of that course and the teachers and classroom facilities for those courses will be acting as inventory cost for EMU.

Circumstance 2

Another case can be when there is a sudden boom in any industry for small period of time. Suppose there is a sudden boom in automobile industry and incoming students in EMU will opt more for Mechanical Engineering and this might happen for few years till the boom in the industry is there. So, for those few years there will be large number of classrooms and high paid faculties for Mechanical Engineering. But after few years when some other industry starts flourishing (e.g. IT industry) and automobile industry fails to make huge profits, then the incoming students will opt more for Computer Engineering and the high paid faculties and large classrooms for Mechanical Engineering will be having less students and will not be utilized efficiently thereby adding to the cost of EMU.

So, in the above two circumstances we can see how EMU has faced the bullwhip effect and is facing the loss due to bullwhip effect.