Please read the case below and answer the question. Thank you. Question: Explain

Question

Please read the case below and answer the question. Thank you.

Question: Explain how the bullwhip effect could impact ETSY. What are the pros and cons?

Case Study: What does orthopedic surgery and governing a country have in common with knitting socks, scarves, and headbands? Nothing except the salary. Hobbyist Alicia Shaffer is earning $80,000 a month selling her handmade goods on Etsy, which adds up to an annual revenue of $960,000. That is the same amount as an orthopedic surgeon makes, and more than twice as much as the United States president makes.

Etsy is an online craft makerspace for handmade goods. ETSY is building a human, authentic, and community-centric makerspace that uses the power of business to create a better world. In an Etsy Economy, creative entrepreneurs can find meaningful work selling their goods in both global and local markets, where thoughtful consumers can discover those goods and build relationships with the people who make and sell them. It’s an ecosystem that connects buyers around the world to the communities where Etsy shop owners live, work, and create. As Etsy grows it is committed to its mission ensuring its core values are woven into all decisions it makes for the long-term health of its business, from the sourcing of office supplies to employee benefits to the items sold in its marketspace.
Shaffer’s company ThreeBirdNest is named after her bird tattoo that honors her three children. Shaffer attributes her success to deep-seated motivation and access to a global supply chain through Etsy. ThreeBirdNest launched in 2011, when she made a few headbands for the small women’s clothing boutique she ran in Livermore, California. Her headbands were so popular she decided to start selling them online. “I opened an Etsy shop, figuring I‘d help pay for my kids’ soccer and dance lessons to supplement the boutique’s sales,” states Shaffer. “I was recovering from the failure of a business I’d run selling baby products—handmade slings, carriers, and blankets. After that business
tanked in the recession, I’d lost a little bit of confidence in my ability to be an entrepreneur.”
In the first few weeks after its launch, ThreeBirdNest made 90 sales. Shaffer credits much of the traffic to Pinterest—she pinned her items. Still, “It was absolutely mindboggling. I thought it was a complete fluke.” But a few months later Shaffer found herself hiring a friend to help with shipping as orders began flowing like water. Through its independent website and Etsy shop, ThreeBirdNest receives an average of 150 orders per day, with most orders consisting of three items. Around the holidays, that number goes up to 700 to 1,200 orders per day. Last January, the business raked in a total of $128,000 in sales. Since its launch, it has made 100,000 sales on Etsy alone. ThreeBirdNest is
unusually successful on Etsy, as most Etsy shop owners feel lucky to sell 10 pieces a month, and 65% of Etsy sellers make less than $100 from their shops in a year. Etsy makerspace crafters usually need day jobs to support their hobbies.

Explanation / Answer

Bullwhip is the effect on supply chain of the change in demand of products in the market. It is the process of increase or decrease of inventory based on the variation of the customer demand. ETSY is an online platform to sell handmade goods made and sold by creative entrepreneurs . The items that are hand made and sold on this website are created as per the demand and orders of the suppliers. Such a market will greatly be effected by the bullwhip effect. The impact of it on the inventory of the ETSY market can be as follows:

- If the demand will be low than the inventory at one time, based on it the bullwhip effect will reduce the inventory. This will result in stockouts if the demand suddenly rises as the inventory is low and products cannot be produced and supplied immediately.

- The opposite scenario can occur when the demand is less and the inventory is over stocked. Excessive inventory can be a wastage and of goods that are handmade it can be a greater loss.

- Continous bullwhip effects can change the buying and ordering patterns. The orders made in batches can make more chances of bullwhip effect then small orders. In this type of industry small and frequent orders are safer to make.

- The relationships with suplliers can be effected adversly as with the fluctuations in demand the buyers will increase and decrease their orders from their suppliers which will become a diificult situation in this industry. Orders cannot be made instantly or the ones made cannot be destroyed easily hence the supplier may not be happy to maintain the business terms for long in case of bullship effect.

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