Bullwhip Effect in Supply Chain

The dependencies between actors, activities and resources cause negative consequences when stocking level variability occurs upstream or downstream in the supply chain due to the bullwhip effect (Svensson, 2005).

Information about Bullwhip Effect in Supply Chain

The 'bullwhip effect' occurs when companies significantly cut or add inventories and even small increases in demand can cause a big snap in the need for parts and materials further down the supply chain (Aeppel, 2010). This phenomenon was first described by Forrester in 1958 and has been experienced since the 1960s by those playing the Beer Distribution Game developed at the Massachusetts Institute of Technology (Sterman, 1992). The term 'bullwhip effect' was first used in the management circles of Proctor & Gamble, when in the 1980s the company experienced extensive demand amplifications for their nappy product Pampers. This terminology reflects the way the amplitude of a whip increases down its length, just as variations in orders tend to get amplified along the supply chain (The Economist, 2002).

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