Design of a Bull Whip control system at Royal DSM
Royal DSM is a Dutch life sciences and performance materials company that experienced plummeting sales during the worldwide financial crisis in the second half of 2008.
This unprecedented drop in sales however was not aligned with the fluctuations seen at the end markets, some of these were dropping, but nowhere near the levels seen at DSM.
Analyzing data from the supply chain revealed a generalized de-stocking wave as the main cause of the appearance of an amplification or bull whip effect throughout the supply chain. The inherent structure of supply chains, information delays and inventory dynamics explain the observed effects.
In the Industrial Engineering design project, a systems dynamics model was built to predict the dynamics in the orders and stocks in the supply chain. This model enabled management to institute several new control policies, resulting in continued investments and rebuilding stocks ahead of market pick up.