The Bullwhip Effect And Its Relationship With Global Supply Chain Shortages

It is no secret that COVID-19 has changed lifestyle, and as a result how people shop. People started stocking medical supplies, sanitizers, and especially toilet papers in bulk, having one consistent impact on groceries store- empty Shelves, which lead to many store owners implementing limits on how much toilet papers, hand sanitizers and other products a person can buy.For an unprepared supply chain, this is the recipe for disaster. With huge increase in demand for products at retails outlets, the impact of sudden demand is further magnified as one moves upstream in the supply chain. For many supply chain leaders, it presents the enormous and potentially costly challenge to deal with.

How Bullwhip effect came into picture?

“The Bullwhip effect” was first coined by MIT professor, Mr Jay Forrester. He describes this phenomenon as, when inventory levels undergo huge fluctuations up the supply chain in response of a change in consumer demand. Such variations and unpredictable increase in demand leads to significant supply chain failures includes overstocking inventory, ineffective logistics, poor customer service and lost revenues.

Looking Ahead- How to avoid the Bullwhip effect?

For years, companies have focused on building a lean-supply-chain-management strategy that optimizes the value of it, but this often leads to low inventories. It also makes supply chain difficult to pivot in response to supply and demand shocks. Interestingly, Covid-19 has revealed certain level of supply chain rigidness and forced leaders to find ways to overcome such vulnerabilities.

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