Beer Game

Bullwhip Effect Through the numerous stages of a supply chain; key factors such as time and supply of order decisions, demand for the supply, lack of communication and disorganization can result in one of the most common problems in supply chain management. This common problem is known as the bullwhip effect; also sometimes the whiplash effect. In this blog post we will explain this concept and outline some of the contributing factors to this issue.

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The bullwhip effect can be explained as an occurrence detected by the supply chain where orders sent to the manufacturer and supplier create larger variance then the sales to the end customer. These irregular orders in the lower part of the supply chain develop to be more distinct higher up in the supply chain. This variance can interrupt the smoothness of the supply chain process as each link in the supply chain will over or underestimate the product demand resulting in exaggerated fluctuations.

What contributes to the bullwhip effect?

There are many factors said to cause or contribute to the bullwhip effect in supply chains; the following list names a few:

• Disorganization between each supply chain link; with ordering larger or smaller amounts of a product than is needed due to an over or under reaction to the supply chain beforehand. • Lack of communication between each link in the supply chain makes it difficult for processes to run smoothly. Managers can perceive a product demand quite differently within different links of the supply chain and therefore order different quantities. • Free return policies; customers may intentionally overstate demands due to shortages and then cancel when the supply becomes adequate again, without return forfeit retailers will continue to exaggerate their needs and cancel orders; resulting in excess material. • Order batching; companies may not immediately place an order with their supplier; often