What is Bullwhip effect?
The Bullwhip Effect, also known as the Whiplash Effect. When the 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.
It can occur by many factors:
1.Disorganization: When ordering a Higher or Smaller amount of a certain product due to an Over/Under Reaction to the supply chain.
2.Lack of Communication between each link in the supply chain makes it difficult for processes to run smoothly. For Example Managers can see a demand on a product quite differently within the different links of the supply chain, therefore ordering different Quantities.
3.Order Batching: Companies may not immediately place an order with their supplier; often accumulating the demand first. Meaning that some Companies order products Weekly or even monthly resulting a variability in the demand – when there is a lot of Demand in some stage and no demand afterwards, because of the time waited for companies to have certain products in stock.
3.Price Variations (Discounts and Cost changes) can upset the normal buying patterns resulting a Disbalance.
