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Bullwhip Effect in Supply Chain


Tom
Posts: 16
 Tom
Topic starter
Active Member
Joined: 2 years ago

Hey, came across this term (Bullwhip effect) in some supply chain articles. What is this exactly? How does this impact the warehousing operations?

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WarehouseBlueprint
Posts: 62
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Joined: 5 years ago

Bullwhip effect is a phenomenon in the supply chain when the information are not passed to the respective stakeholders. In layman's term, for example, a surge in demand by the customers (remember the surgical masks sudden demand spike at the beginning of Covid situation?) generated an imbalance in the demand and supply upstream.

Wholesalers do not have sufficient stock to cater to the customers' needs. Stockout resulted. Wholesalers will then place a huge order from the manufacturers. There is a lead time here.

The manufacturers also need to order from the raw material vendors, and require time to begin manufacturing. By the time the stock reach the wholesaler and customers, the demand and supply for all the parties involved will be skewed.

A more detailed explanation can be found below.

https://en.wikipedia.org/wiki/Bullwhip_effect#text=The%20bullwhip%20effect%20is%20a,further%20up%20the%20supply%20chain.

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WarehouseBlueprint
Posts: 62
Member
Joined: 5 years ago

There are certain sites which provide a game to show the bullwhip effect.

https://supplychain-academy.net/beer-game/

https://beergame.org/the-game/bullwhip-effect/

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Nic
Posts: 19
 Nic
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Joined: 2 years ago

The financials will be quite challenging.
There can be cases where the stakeholder anticipates too much, thus placing a huge order.
When the inventory arrives, the demand may not be there.
This will result in high inventory carrying cost.

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