Causes of the bullwhip effect sources of variability can be demand variability, quality problems, strikes, plant fires, etc variability coupled with time delays in the transmission of information up the supply chain and time delays in manufacturing and shipping goods down the supply chain create the bullwhip effect. To put the bullwhip effect in simple terms, in looking at businesses further back in the supply chain, inventory swings in larger and larger waves in response to customer demand (the handle of the whip), with the largest wave of the whip hitting the supplier of raw materials.
The bullwhip effect is where variations of inventory are amplified as you move up the supply chain from consumer to end raw material supplier when there is a change in consumer demand and no information is being shared about consumer demand between all members in the supply chain which will leave suppliers, manufacturers, distributors, and retailers with very high or low inventory.
Although the bullwhip effect is a common problem for supply chain management understanding the causes of the bullwhip effect can help managers find strategies to alleviate the effect hopefully this blog post has given you a simple understanding of the term.
The bullwhip effect is a supply chain phenomenon describing 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 the effect is named after the physics involved in cracking a whip. The bullwhip effect on the supply chain occurs when changes in consumer demand causes the companies in a supply chain to order more goods to meet the new demand the bullwhip effect usually flows up the supply chain, starting with the retailer, wholesaler, distributor, manufacturer and then the raw materials supplier. What happens when a supply chain is plagued with a bullwhip effect that distorts its demand information as it is transmitted up the chain in the past, without being able to see the sales of its products at the distribution channel stage, hp had to rely on the sales orders from the resellers to make product forecasts, plan capacity, control. For more details about the bullwhip effect -- and what causes it -- see the classic 1997 mit sloan management review article on the topic, the bullwhip effect in supply chains in that article, hau l lee, v padmanabhan and seungjin whang argue that the bullwhip effect results from rational behavior by companies within the existing structure of supply chains.
What is the bullwhip effect the bullwhip effect can be described as a series of events that leads to supplier demand variability up the supply chain trigger events include the frequency of orders, varying quantities ordered, or the combination of both events by downstream partners in a supply chain.