How Can You Batle The Bullwhip Effect

Many supply chain experts stress that we will be facing a large bullwhip effect as a result of the COVID-19 crisis. For non-supply chain people: the bullwhip effect is a phenomenon where small changes in demand at the end-consumer level lead to (unreasonably) large orders and inventory levels at the manufacturer.

There are a few explanations as to why this is happening; the main contributors to the bullwhip effect are due to lack of information sharing in the supply chain, long lead-times from manufacturer to retailer and the need for each node in a supply chain to keep its inventory and buffer stock. The human component of overreacting to issues (“in trouble, we double”) is also one of the biggest reasons the bullwhip effect exists. Despite it being a well-researched phenomenon, in practice, the bullwhip effect is still very common.

In this knowledge paper, supply chain expert Paul Durlinger reconstructs the concept based on an example (toilet paper). How the pendulum effect could manifest itself and how it will probably continue to work in the chain in the coming months. What are the lessons for the future?