The bullwhip effect, or more commonly referred to as the Forrester effect, concerns supply chain disruptions that occur when demand suddenly spikes upwards.
These sudden and unforeseen spikes in customer demand force every member of a given supply chain to increase their inventory counts in anticipation of future volumes and sales. Unfortunately, a week or two later and that demand is non-existent.
Companies must understand the bullwhip effect and know their place within a given supply chain. Once they understand their position, they can be better prepared to handle sudden increases in customer demand.
The video provides an example of a consumer-based product where the supply chain is defined by the retailer who purchases from the wholesaler who purchases from the distributor who then purchases from the manufacturer.
The video provides insight into five critical areas that companies should track and be aware of when suddenly coming face-to-face with an unscheduled increase in demand.