Bullwhip Effect

The Bullwhip Effect refers to the phenomenon where small changes in consumer demand at the retail level lead to larger and larger fluctuations in demand further up the supply chain. For example, if customers buy more of a product, retailers order extra stock. This prompts wholesalers and manufacturers to increase production even more, causing excess inventory and inefficiencies. As a result, the fluctuations can amplify with each step in the supply chain, leading to waste and cost issues. Understanding this effect helps companies manage supply chains more effectively and respond to actual consumer demand.