The Bullwhip Effect In Supply Chain

Abstract

In a supply chain the variability of the orders received by the supplier can be greater than the demand variability. This phenomenon is named bullwhip effect. Some researchers are quantified the bullwhip by measuring the differences between observed variances in the different stages of the supply chain. The bullwhip effect refers to the phenomenon of amplification and distortion of demand in a supply chain. By eliminating or controlling this effect, it is possible to increase product profitability reducing useless costs such as stock-out and obsolescence costs. The bullwhip itself it is not a good index of the chain’s performance, because it does not consider the oscillations that occur in the inventories, which also may affect the supply chain performance.

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