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Bullwhip effect

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The bullwhip effect is a supply chain phenomenon where orders to suppliers tend to have a larger variability than sales to buyers, which results in an amplified demand variability upstream. In part, this results in increasing swings in inventory in response to shifts in consumer demand as one moves further up the supply chain. The concept first appeared in Jay Forrester's Industrial Dynamics (1961) and thus it is also known as the Forrester effect. It has been described as "the observed propensity for material orders to be more variable than demand signals and for this variability to increase the further upstream a company is in a supply chain".

Illustration of the bullwhip effect: the final customer places an order (whip), which increasingly distorts interpretations of demand as one proceeds upstream along the supply chain. The bullwhip effect is a supply chain phenomenon where orders to suppliers tend to have a larger variability than sales to buyers, which results in an amplified demand variability upstream. In part, this results in increasing swings in inventory in response to shifts in consumer demand as one moves further up the supply chain. The concept first appeared in Jay Forrester's Industrial Dynamics (1961)[1] and thus…

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