What is Bullwhip Effect?

The bullwhip effect occurs when small fluctuations in retail demand cause fluctuations in wholesale, distributor and manufacturer demand, resulting in inefficiency and disorganization throughout the supply chain. It happens when stakeholders create too little — or too much inventory — due to a limited understanding of demand and continued dependence on traditional forecasting methods. The misalignment increases exponentially as actions and reactions continue.

Real-time information sharing along the supply chain can minimize the bullwhip effect. If partners know what is causing — or is likely to cause — a demand distortion, they can better anticipate risk. Learn more about the supply chain software and supply chain management services offered by GEP


Related Terms

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