🌊Bullwhip effect

Small changes in what customers buy turn into large swings in orders further up the supply chain: shop, wholesaler, distributor, factory. Each stage sees only the orders of the stage below, forecasts from them, adds a margin for safety and passes the padded number on.

The name comes from 🔬 Information Distortion in a Supply Chain - The Bullwhip Effect (1997), which gives four causes:

1. Demand signal processing: forecasting from orders, not from sales
2. Rationing and shortage gaming
3. Order batching
4. Price fluctuations

Nobody in the chain is being stupid. That is the point. The mechanism is forty years older than the name: 🔬 Industrial Dynamics - A Major Breakthrough for Decision Makers, which Yusuf Demir sent me.

Example from work: a customer says a few carriers were late. Support writes carrier delays. By the time it reaches the roadmap it is customers are furious about carriers. Same whip, made of adjectives.

Often confused with: seasonality, which is real demand moving.

Notes: 📖 Lee, Padmanabhan and Whang on the bullwhip effect. Claim: 💎 Demand swings grow as they travel away from the customer. The shipping episodes of 🎙️ Odd Lots are where I first heard the word said aloud.