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Content: At every stage of the supply chain there are possible fluctuations and disruptions, which in turn influence the myriad supplier orders. Changes in customer demand directly influence all the other factors along the chain, including inventory. However, the bullwhip effect can occur even in relatively stable markets where the demand is essentially constant. Forecasting demand has always been a difficult endeavor, and the increasing complexity of today's global supply chains intensifies that difficulty, as does increasing consumer preference for omnichanneland e-commerce. A few of the most common dependencies that can cause a bullwhip effect are: Lead-time issues such as manufacturing delays
Less-than-optimal decisions made by supply chain stakeholders at any point along the chain, for example, customer service or shipping
A lack of communication and alignment between each link or stakeholder organization in the supply chain
Over- or under-reacting to demand expectations, such as ordering too many units or not enough
Customer companies, often retailers, waiting until orders build up before placing orders with their suppliers, a practice called order batching
Discounts, cost changes and other price variations that disrupt regular buying patterns
Inaccurate forecasts from over-reliance on historical demand to predict future demand
Impact on supply chain management
The bullwhip effect can be costly to all the organizations in the supply chain. Excess inventory can result in waste, while insufficient inventory can lead to reduced lead time, poor customer experience and lost business. Most businesses use safety stock (reserve inventory) as a buffer against demand fluctuations. However, safety stock is not a solution to the bullwhip effect, but it provides enough product to fill orders until more arrives from suppliers. Some solutions to the bullwhip effect
Better information is necessary to reduce the bullwhip effect.