Order Variability in a Serial Supply Chain The Bullwhip Effect

2 Order Variability in a Serial Supply Chain The Bullwhip Effect 

But suppose customer demand were to increase suddenly by K units. For simplicity, suppose Node 1 changes its demand forecast to jx + K. It would immediately order to satisfy the current demand and to fill the 

What would happen if all nodes shared the downstream demand information In such a case, every node would see the underlying demand. Thus, the order adjustment would cover the demand faced and would not be confused with the pipeline inventory increase. Thus, the order faced by node n would be -b K (L + S)n +1). The increase in order due to lack of demand information can thus be described as 

This increase reflects the exponential growth in orders in response to lack of information in a fragmented supply chain. As mentioned in Chapter 1, this is called the bullwhip effect. Thus, even in a serial supply chain, lack of transparency can create undesirable volatility even when each entity behaves optimally, thus generating the bullwhip effect. The consequences of such volatility are increased capacity, inventory, delivery lead time, and costs. 

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