Infosys’ blog on industry solutions, trends, business process transformation and global implementation in Oracle.

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Minimizing the Bull Whip Effect in the IT Supply Chain

In his world famous book ' The Fifth Discipline: The Art and Practice of the Learning Organization', Peter Senge talks about the bull whip effect which essentially is how small ripples in demand create bigger ripples on the supply side. The Beer Game is a classic example of this bull whip effect and this applies to the IT industry as well.

Typically companies have forecasted demand and according ramped up the manpower supply. And one fine day recession crops in, your demand pipeline does not result in firm orders and you have surplus manpower on your rolls. And with the changing mindset of doing more with less, IT industry needs to plan their manpower really well.

In the past companies have maintained a certain percentage as reserve manpower so that whenever there is a big order coming in, they can cater to that demand. And typical forecasting methods have been linear where the required manpower was a linear function of the revenue projection. Not any more. With innovative pricing models coming in, companies need to move to a non-linear model to plan the manpower needs.

Secondly, there has to be more co-ordination between the field force and the delivery unit to minimize the information assymmetry. It is imperative that the sales force provide a realistic picture of the demand pipeline to avoid the problem of surplus manpower. The probability of the deal coming in needs to be factored in the regression equation to have a realistic manpower number.

Thirdly instead of a person being tied to one domain/technology, we need to have multi-skilled workforce to offset the order cancellations in a particular technology/domain. After all, no education goes waste (Remember how Steve Jobs' training in calligraphy helped him design the fonts for his Mac)


Agreed with you!

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