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Slide 3:

Lets take a look to its worded definition.

Slide 4.
--This means that the bullwhip effect is the result of inaccurate information
about the consumers demand and the effect of this starts from the consumer,
up to the suppliers, up to the distributers, up until the manufacturer.

Slide 5
It is termed Bullwhip because it resembles a whip that is hit and produces a
huge impact all throughout the oscillation.
We notice that The Manufacturer receives the greatest impact of this problem
because as the information goes farther from the source, which is the
consumers, the effect goes higher.
To have a wider understanding about the bullwhip effect in the supply chain,
Lets take a look at the following illustrative example.

Slide 6.
If you have ever dropped a stone into a water, you would probably
notice that the point of impact is about the size of the stone but they
quickly produce ripples and go larger and larger as they move out.
A small impact can create large consequences. The same as true in a
supply chain. This situation is called, THE BULLWHIP EFFECT.
Slide 7-8.
A quick example will illustrate a rather simple idea, lets say that you
are a store manager in a large city, there is a series of party surrounding
your store. As a consequent, you assume that there will be a high
demand of potato chips for the incoming weekends.
Slide 9.
We can think of the party goers as the one who are cracking the whip.
Now, you misread the situation and forecast high demand for potato
chips that is actually far more than what real consumer demand would
be next weekend.
In fact, you compound your over estimation as you order more
than what you think is needed because of course you dont want to
run out of inventory. The whips oscillation now starts to get

Slide 10.
The whips not done yet, your potato chip distributor notices and up
taken your order and, thinking the same way you do, orders more
inventory than it forecasts as necessary to make sure it can fill all your
And of course, youre not the distributors only customer. So the
distributor, aggregates all of its orders from you, and other stores and
places a huge order to its supplier.

Slide 11-12.
The whips still not done yet and the oscillations are getting bigger. The
manufacturer of the potato chip misreads the demand from your
distributor and the other distributors it services also exaggerates its
In result, there will be excess inventories throughout the chain, and the
manufacturer would have the largest.
Slide 13-14.
As a summary, bullwhip effect comes from the consumer, up to the
suppliers/costumers, up to the distributors, up until to the
The greatest impact falls into the manufacturer because as the
information goes far from the source, the more it gets distorted, the more
excess products in their inventory which results to several problems
such as,
Problems with quality--- this has greater impact to products that reduces
its quality as time passes by.
Reduces profitthe excess products are being sold in sale just to bring
back its capital.

Slide 15.
Lack of Communication---Like in our previous example, lack of communications
leads to misinterpretation of the situation.
Free return Policies---Costumers may intentionally overstate demands due to
shortage and cancel when the supply becomes adequate. Without a cancellation
fee, they will continue exaggerate their demands and cancel whenever they want
which results to product excess.
Storage Gaming---when the demand exceeds the supply, the tendency is that the
manufacturer will control the product distribution. Of course the suppliers know
this thing, so when they really need for example, 100 pieces of a product, they
will double it because they know that the manufacturer will just give 50% of their
order for example. In this manner, they will get the number that they need. This
distorts the demand information in the supply chain.
Price Variation---. When prices are lower, members of the supply chain tend to
buy in larger quantities. When prices increase, order quantities decrease. Price
uctuations create more demand variability within the supply chain.