Bullwhip Effect

The Bullwhip effect

Does the bullwhip effect flow from customers to manufacturer or from manufacturer to customer?  Explain.

The bullwhip effect flows from customer to manufactures. Identified as a variation contributor, the bullwhip effect “occurs when small changes in demand occur” (Evans & Lindsay, 2016, p. 73). As the demand increases, a variation is caused in the production level, increased inventories are needed to meet the demand. This variation causes an increase at the factories. The factories increase causes an ever growing demands from the suppliers. As manage compensate at each process, cost increase to meet the demand of the variation.

The gun and industry is an example of the bullwhip effect. When the Federal Government begins to talk about gun control, the population runs to the stores and begins buying up guns and ammunition. The sporting goods stores call the distribution centers for more guns and ammunition. Stock is so, the distributors call the factories to produce more guns and ammunition, and likewise the manufactures don’t have enough to supplies to meet the demand. The manufactures calls the suppliers for materials. With each level of supply level there are increased cost associated with the expedited orders. The increased cost at each level eventually trickles back to the consumer.

Would special discounts and other price changes potentially cause a bullwhip effect?  Explain.

Yes, discounts and price changes can potentially cause a bullwhip effect, especially on common, household goods. As deep discounts are offered to the consumer, there can be a rush to the store to purchase the goods. Diaper are a good example. There is a need for this item, especially in large quantities. When a retailer offers are considerable diaper discounts, parents understand the value, recognized the savings and begin purchasing in greater quantities than normal. If the run on diaper is unplanned for, the shortage at the retailer can cause a variation in demand creating a bullwhip effect. A retailer can avoid causing this variation by purchasing increased stock prior to the posted discounting.