The bullwhip effect (also known as demand amplification, whip-saw, whiplash effect, or Forrester effect) refers to the phenomenon of demand variability amplification as moving up in the supply chain: from the point of actual (final) demand to the point of origin. Moving up in the supply chain from consumer to supplier increases demand variability.
It means that variability at the "end" of supply chain (closer to consumption, e. retailer) is much less, than at the other "end", where it begins (far from consumer, e. The more actors exist in a particular supply chain and the greater is lead time, the greater demand variability would be.
We use the term 'bullwhip' because the oscillation in demand builds up the chain, like the oscillations in a whip that is cracked tends to grow larger as the force is moved down to its tip.
Some of researchers try to find origins of the bullwhip effect in the psychology of decision makers.What causes the bullwhip effect that distorts information as it is transmitted up the chain?The authors identify four major causes: Demand forecast updating, order batching, price fluctuation, and rationing and shortage gaming.At first glance, the variabilities did not make sense.While the consumers, in this case, the babies, consumed diapers at a steady rate, the demand order variabilities in the supply chain were amplified as they moved up the supply chain. (In some industries, it is known as the “whiplash” or the “whipsaw” effect.) When Hewlett-Packard (HP) executives examined the sales of one of its printers at a major reseller, they found that there were, as expected, some fluctuations over time.