Hockey Stick Phenomenon: Supply Chain Management Challenge in Brazil

Abstract

The objective of this study is to investigate a phenomenon that occurs in Brazil, specifically the spike in demand at the end of the sales period, known as the hockey stick phenomenon. This analysis will encompass the causes as well as the impacts of this phenomenon, in a way that allows alternative policies to be evaluated. Data was collected from a Brazilian branch of a large multinational in the non-durable consumer goods industry and in semi-structured interviews conducted face-to-face with executives of 26 clients. The data was used to generate a continuous simulation model based on the methods of systems dynamics. The findings showed that the phenomenon negatively impacted the manufacturer's financial performance in the long term and indicated required changes necessary to remediate the phenomenon. This is an empirical study on the hockey stick phenomenon, a problem that affects diverse companies in Brazil. The study showed that companies should not assume the hockey stick phenomenon to be an exogenous problem; it showed that there are policies able to improve financial performance; and it provided ideas regarding ways to carry out the change process.

Matching volatile demand with transportation services in Vietnam

“…Prior research concludes (Hines et al, 2000;Sohoni et al, 2010;Zotteri, 2013) that demand spikes take a place at the end of the period (typically month and/or quarter), and these particularly happen in the stabile demand environment. This effect is argued to be well present in emerging markets (Lorentz et al, 2007;Sanches and Júnior, 2011), and this study also illustrates clearly that one of the leading Vietnamese retail regions is influenced by this phenomenon.…”

“…Singer et al (2009) state that one of the most harmful problems in the supply chain is the HSE sales pattern faced by suppliers, which consists of severe spikes toward the end of every sales period even though consumer demand may be rather flat. Sanches and Júnior (2011) analyze the effect in emerging markets by Brazilian non-durable supplier for retailers and found that in the year 2007, more than half of sales invoices were done in the last five days of each month.…”

“…The problem is not new, but so far the HSE still prevails in emerging countries, and within long supply chains with numerous stages and actors, spikes can be considerably higher than in developed countries (Lorentz et al, 2007). Sanches and Júnior (2011) provide a list of possible solutions for manufacturers to deal with the HSEat the core of these are avoiding discounting, making discounting available earlier during the month, varying discounts in time-wise manner to different regions/customers and restricting amounts of production to end item inventory. Suggestions to remedy are similar in Sodhi et al (2014) research, but they propose based on analytical models to avoid using coordinated discounts among products and enable customers to use lower transaction cost methods in purchase orders and supply.…”

The Impact of the Hockey-Stick Phenomenon on the Retail Industry in India: Pre and During COVID-19

“…According to a study in Brazil, hockey stick sales negatively impacted the manufacturer's financial performance in the long term and required measures should be adopted to remediate the phenomenon (Sanches and Lima, 2014). Similarly, the bullwhip effect was coined by Procter and Gamble executives to describe the problems they were facing in the diapers market (Sanches and Lima, 2014;Lee et. al., 1997).…”

“…al., 2005). Overall, the hockey-stick phenomenon has generally declined the profits of companies over a period and for the industry even, the long-term result was a fall in profits for a company caused by increased costs (Sanches and Lima, 2011).…”