From the course: Supply Chain and Operations Management Tips

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Beware of the bullwhip effect

Beware of the bullwhip effect

From the course: Supply Chain and Operations Management Tips

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Beware of the bullwhip effect

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- What fascinates me about supply chains is that they're actually complex systems. And one of the most interesting dynamics that occurs in these systems is a phenomenon called the bullwhip effect. It's a pattern that can cause huge swings in your inventory, making it feel like you're riding a supply chain rollercoaster. Let's see what causes the bullwhip effect, and how you can protect yourself from it using some simple supply chain management strategies. In a perfect world, customers would always buy the same amount of product on a regular schedule. That would lead to a stable demand pattern throughout the entire supply chain. But in the real world, customer orders are unpredictable. The bullwhip effect occurs because demand signals often get amplified as they're passed up the supply chain. So any variation in the orders from a customer creates larger variations in each upstream step. The result can be a stock out of products in one place, while another part of the supply chain is…

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