Bullwhip effect

How it is used

A classic supply chain concept, discussed in planning meetings and courses. Causes include ordering in large batches, price promotions, panic buying and poor information sharing. Sharing point-of-sale data and placing smaller, more frequent orders help reduce it.

Example sentences

1. A 10 percent rise in store sales caused a 40 percent jump in our orders to suppliers; that's the bullwhip effect in action.

2. Sharing sales data with our suppliers has reduced the bullwhip effect.

Common collocations

• reduce the bullwhip effect
• bullwhip effect in the supply chain
• demand swings
• amplify demand changes

Related terms

• demand forecastingThe process of estimating how much of a product customers will buy in a future period, using sales history, market information and planned promotions.
• demand planningThe process of predicting future demand and agreeing on one demand plan that the company then uses to plan purchasing, production and stock.
• safety stockExtra stock kept on top of expected demand to protect against sudden increases in demand or late deliveries from suppliers.
• supply chainThe whole network of companies, people and activities that turns raw materials into a finished product and moves it to the final customer.
• visibilityThe ability to see where goods, orders and stock are at any moment along the supply chain, usually through shared real-time data.

More terms: Demand Planning

• S&OP
• MRP
• just-in-time