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If each stage of a supply chain views its demand as the orders placed by their downstream counterpart, the bullwhip effect is realized by the supply chain. Each member develops a forecast that is based on something other than the true customer demand and hilarity ensues.
what is bullwhip effect?
According to the bullwhip effect, which is a characteristic of the supply chain, modest changes in demand at the retail level can lead to steadily increasing changes at the wholesale, distributor, manufacturer, and raw material supplier levels. The physics of cracking a whip are referenced in the effect's name.
The bullwhip effect is brought on by price fluctuations, order batching, rationing, and gaming, as well as the updating of demand forecasts. All participants in a supply chain update demand forecasts on an individual basis.
The likelihood of the bullwhip effect can be considerably decreased by shortening the order-to-delivery period. Less inventory is built up the faster raw materials are transformed into finished goods in the supply chain.
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