What is the “bullwhip effect” in the supply chain?

The bullwhip effect refers to the phenomenon where small variations in customer demand become increasingly amplified as they move upstream in the supply chain. For example, a slight increase in demand at the retail level can lead distributors—and then manufacturers—to place much larger orders, causing excessive stock fluctuations.

This effect is often driven by poor communication and poorly synchronized forecasts between partners. Understanding and controlling it (through better collaboration and real-time data sharing) helps prevent inconsistent inventory levels and operational inefficiencies.

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