29 THE OUTSIDE-IN PLANNING HANDBOOK | 2023
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The So What? Who Cares?
Each test of the concepts involved training, data collection, model building, and refinement. Each test took four to five months. No company involved in the testing had measured latency, the bullwhip effect, or Forecast
implementations were not implemented correctly based on forecastability and data quality. 4. While the four companies measured forecast error, they were not measuring Forecast Value Added (FVA). Three of the four companies unknowingly degraded the forecast with the current process definition. 5. No company measured supply lead time and incorporated lead time variation into modeling. 6. Bullwhip measurement was new and enlightening. The goal is to minimize the bullwhip impact on manufacturing and procurement. Measurement of FVA in concert with the bullwhip reduces waste.
Value Added. The concept of a balanced scorecard was new. The ideas were new. The patterns in the testing were clear. In the pilot work, we saw: 1. Outside-in Models outperformed Inside-out Models in each test.
2. For each organization, data was readily available. Each organization had valuable data that was not being used.
3. Three of the four companies deployed planning previously without testing the models. The existing
Table 10. Results of Outside-in Testing
Company
Current State
Inside-Out Model
Outside-In
FVA
Bias
Bullwhip
FVA
Bias
Bullwhip
FVA
Bias
Bullwhip
Large White Goods Manufacturer
-7
Negative
230%
2.0
Negative
35%
13.5
Balanced
22%
Large Discrete Manufacturer E-Commerce Distributor
-10.4
Negative
201%
2.9
Negative
42%
14.7
Balanced
25%
8
Positive
48%
9.9
Negative
52%
17.3
Balanced
37%
Food Manufacturer
-12
Negative Unknown
-5.6
16.97% Unknown
2.08
3.85% Unknown
______________________________ What is the bullwhip effect? It is the phenomenon where slight variations in demand at the point of sale can cause large amplifications to upstream supply nodes. Since the definition, the concept has been taught through games like the Beer Game. Yet, no technology has incorporated the calculation into supply chain planning, and there is no clear definition of how to use the bullwhip factor in decision-making. _____________________________
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