Bullwhip Effect

The term bullwhip effect was coined in 1961 by MIT computer scientist Jay Forrester in his seminal book "Industrial Dynamics." It describes what happens when fluctuations in demand reverberate and amplify throughout the supply chain, leading to worsening problems and shortages. Imagine the physics of cracking a whip. It starts with a small flick of the wrist, but the whip's wave patterns grow exponentially in a chain reaction, leading to the tip, a snap and a sharp pain for anyone on the receiving end. The same thing can happen in supply chains when orders for a product from a retailer go up or down by some amount and that gets amplified by wholesalers, distributors and raw material suppliers. The onset of the COVID-19 pandemic, which led to lengthy lockdowns, massive unemployment and a whole host of other effects that messed up global supply chains, essentially supercharged the bullwhip's snap.