Heat Treating and the Bullwhip Effect
How your thermal processor can help lessen the pain of supply chain fluctuations
Manufacturers must be able to respond to changing market conditions if they want to ensure their businesses’ longevity. While the adage is true that the only thing constant is change, no one could have foreseen the impact of the global pandemic of 2020. The pandemic demonstrated the power of the bullwhip effect on supply chains. It has also highlighted how a good heat treating partner can help manufacturers navigate uncertainty with more confidence. This article will explain the bullwhip effect, how it may affect you, and how a proactive thermal processing partner like Paulo can help.
What is the bullwhip effect?
The bullwhip effect (also known as the whiplash or whipsaw effect) is a term that describes a common phenomenon in supply chain management: changes in market demand have an increasingly pronounced effect on manufacturers further up the supply chain.
So, if you think of end consumers as the hand that holds the whip and raw material suppliers as the tip, it’s easy to visualize: a subtle movement made by the hand causes massive movement at the end.
The bullwhip effect can be caused by factors such as forecasting errors, order batching, lead times, and sales or price discounts…in addition to major global events such as the 2020 pandemic.
How the bullwhip effect impacts you
These supply chain fluctuations can have potentially adverse consequences for your business. You may wind up with too much stock on hand, leading to increased inventory holding costs. Having to start and stop production in a volatile market makes it tricky to forecast, staff, and schedule proactively. Also, lacking confidence in your ability to meet heightened demand can lead to missed opportunities, dissatisfied customers, and lost revenue.
When it comes to heat treatment, fluctuations in demand can cause further operational challenges, particularly if you perform it in house. First, the costs and time required to stop and start heat treating equipment can become burdensome when order volume is unpredictable. You may have laid off or furloughed staff who typically performs heat treating or reduced the number of shifts, leading to bottlenecks in production.
If you outsource heat treatment to a partner, swings in demand will also exert pressure on your supplier. Because they are likely facing higher volumes from other customers in your sector, they may be unable to meet the turnaround times you require to keep your commitments. On the flip side, you may find that your supplier is less responsive after a period of low volume. Either scenario can signal that it may be time to seek out a thermal processor who can serve you consistently, even when the market is anything but consistent.
How Paulo datagineering helps you maintain efficiency under fluctuating market conditions
Thermal processing is often one of the final links in the supply chain. After processing, parts are often then sent off for assembly for installation in aircraft, automobiles, firearms, or wherever their destination may be. We’re familiar with the bullwhip effect and have built our systems and processes to lessen its burden on our team and help our customers remain efficient under uncertain conditions. Here’s how Paulo datagineering works for you.
- Minimizing turnaround times. Turnaround times are critical when your parts are in high demand. We arrange the flow of work through our system to minimize equipment downtime and avoid less-than-load cycles when possible. Maintaining our maximum total throughput consistently allows us to process your parts at the greatest possible speed.
- Built-in capacity for emergency and overflow orders. We know that emergencies happen, and we want to be able to help our partners handle those situations with as little stress as possible. That’s why we fill our capacity to only 80% with routine jobs so when your customer needs a big order with tight turnaround time, you can say yes with confidence—maintaining your reputation as a supplier they can trust and capturing every revenue opportunity. In addition, equipment redundancies and the multiple locations across the Paulo system provide you further protection against contingencies.
- Precision processing with automation and integration. When timelines and budgets are tight, accuracy counts. Every part that requires reprocessing or winds up in the scrap bin affects timelines and the bottom line. Paulo’s PICS system, testing processes, and automated furnace controls ensure maximum repeatability for your parts so we get the right result the first time.
Let’s battle the bullwhip effect together
Whether you already outsource your thermal processing, need help with contingency planning, or perform heat treatment in house, Paulo can offer relief from the effects of supply chain fluctuations. We’ve datagineered our systems and processes to help you navigate market uncertainty with confidence. Connect with a Paulo expert today—bring us your challenges, and we’ll work on solving them together.