Bullwhip Effect

Within a supply chain context, the bullwhip effect manifests when a minor surge in demand is magnified as it moves through each stage of the supply chain. As each participant reacts to this initial demand increase, the tendency is to overcorrect by producing surplus goods. This phenomenon results in heightened production, distorted demand predictions, and erratic inventory levels.

Mitigating or preventing the bullwhip effect in the supply chain is possible through strategic resource allocation and meticulous planning. Understanding the repercussions of the bullwhip effect on supply chain management is crucial, and taking proactive measures can effectively address and minimize its impact.