The effect of the "bull whip" on Anglo American Platinum Limited (South Africa)

Aboobaker, Tariq Suleman
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ABSTRACT The purpose of this research report was to quantify if the bullwhip effect (BW) exists in the platinum industry by focusing on the highest cost line item in their books excluding labour, and what the impact of the BW has on its cost structure of the organisation. The mining industry is encountering two major problems: (1) Escalating labour cost due to the unprotected strikes giving rise to high operating costs, and (2) low demand for platinum. They believe by reducing jobs they will improve their financial status. Based on the literature review, the autoregressive second order approach was used to quantify the bullwhip effect and the financial implication related to the BW was also calculated. This model summarised the literature on quantifying the bullwhip effect for successful management of supply chains and directly contributing to the company’s financials. Anglo American Platinum was selected as the company to conduct this study on. A quantitative, longitudinal method was employed. The highest cost item (excluding labour) was selected to determine the BW. The main findings supported the theoretical BW and financial implication operating with the BW. Their supply chain has an excellent service level agreement in place but operating with a BW, this amplifies the net stock amplification variance, thus increasing inventory costs. By halving their lead time, it has reduced the BW by 12.6 percent units. Their total inventory cost associated with the BW is R 4.0 M. It has been concluded that this model could help bring about a successful reduction in the bullwhip effect and even eliminate it completely by aligning their supply chain to their organisation’s key indicators. In turn this would require a strategic alignment between supply chain and the key stakeholders. The model did reflect as relevant as the real business world. It could therefore be used to direct further research in this field.
MBA 2015
Business logistics, Platinum industry,Strategic planning