Construct · 1 fields · 2 citations

bullwhip effect: a standalone construct

One name. One construct. A landmark on the map.

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bullwhipeffect1 CONSTRUCTBullwhip effectFORRESTER · BULLWHIP

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Operations and supply chain management

The upstream amplification of demand variability along a supply chain

Jay Forrester's 1961 book Industrial Dynamics first traced how a small change in end-customer demand swells into progressively larger swings in orders and inventory at each step back up a supply chain, a distortion he modeled with feedback systems but did not yet name. Hau Lee, V. Padmanabhan, and Seungjin Whang gave the pattern its lasting name and a formal analysis in 1997, using "bullwhip effect" for the way order variability grows as it travels upstream from retailer to wholesaler to manufacturer to supplier, so that each tier sees demand look more erratic than the tier below it. They attributed the amplification to four operational causes: demand-signal processing (reading random fluctuations as trends), order batching, forward-buying prompted by price promotions, and rationing behavior during shortages. The construct is distinctive because it isolates a supply-chain problem that arises from information and ordering behavior rather than from any real change in consumption, and it is defined by a measurable comparison of order variability to demand variability across successive links.[1][2]

Unit
A supply-chain phenomenon defined by the growth of order variability from one tier to the next
Recovery means
Not applicable
Measured by
Quantified as the ratio of order (or production) variance to end-demand variance across successive supply-chain stages, with a ratio above one indicating amplification

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Nearby constructs

amplification4 fields · 4 citationsjingle · one word, four constructsdemand4 fields · 4 citationsjingle · one word, four constructsinventory1 fields · 2 citationsanchor · a standalone construct

References

  1. Forrester, J. W. (1961). Industrial dynamics. MIT Press. ISBN 9780262060035
  2. Lee, H. L., Padmanabhan, V., & Whang, S. (1997). Information distortion in a supply chain: The bullwhip effect. Management Science, 43(4), 546–558. https://doi.org/10.1287/mnsc.43.4.546

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