Bullwhip Effect

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    Bullwhip Effect 

    • About: 
      • It is a supply chain phenomenon that refers to the amplification of variability in demand as one moves up the supply chain from retailers to manufacturers.
      • Describes how small fluctuations in demand at the retail level can cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer and raw material supplier levels. 
    • Derived From: 
      • a scientific concept in which movements of a whip become similarly amplified from the origin (the hand cracking the whip) to the endpoint (the tail of the whip).
    • Causes:
      • Over- or under-reacting to demand expectations
      • Less-than-optimal decisions made by supply chain stakeholders 
      • Inaccurate forecasts from over-reliance on historical demand to predict future demand
      • Lead-time issues such as manufacturing delays
    • Impacts:
      • Increased costs associated with storage, transportation, spoilage, losses of revenue, delays to shipments
      • Excess inventory and overinvestment in production
      • Leads to disruptions to the supply chain

    Source: Investopedia