The phenomenon known as the Bullwhip Effect explains how slight changes in consumer demand cause orders higher up the supply chain to vary more and more. Forecasting mistakes, order batching, price swings, and a lack of communication between supply chain participants are frequently the causes of this distortion. Stockouts, excessive inventory, and ineffective resource use are the outcomes. Advanced demand forecasting methods, frequent replenishment, cooperative planning, and demand transparency are all necessary to reduce the bullwhip effect.
