The Bullwhip Effect in Supply Chains

The bullwhip effect is an amplification of demand variability that affects supply chains. A company is subject to a bullwhip effect when customer demand leads to a change in inventory and purchases do not correspond to sales, thus leading to greater variability. The phenomenon may occur in cases of constant customer demand in a supply chain. It has been observed that supply chain demand variability increases upstream from end user to producer. The bullwhip effect is a well-studied phenomenon both in theory and practice. In critical study, research has been conducted on simulation, empirical investigations, business games and qualitative as well as quantitative approaches. On the one hand, there are studies that examine the occurrence of the bullwhip effect and others that examine its mitigation. Although extensive research has already been done on the bullwhip effect (Lee, Padmanabhan, & Whang, 1997a; Lee, Padmanabhan, & Whang, 1997b; see Disney, Farasyn, Lambrecht, Towill & Van de Velde 2006 for an excellent review of research done to date), it is still a challenging field of study: the bullwhip effect can only occur in supply chains and research is subsequently tied to supply chain management and its approaches. Supply chain management is subject to ongoing changes and developments as a result of globalization and technological innovation, which influence collaboration of supply chain partners. The resulting need for further research on supply chain management leads to research opportunities on the bullwhip effect. BACKGROUND