algo-sc-bullwhip
Bullwhip Effect Analysis
Overview
The bullwhip effect describes how small fluctuations in consumer demand amplify progressively at each upstream stage of the supply chain. A 5% retail demand increase can become a 40% order spike at the manufacturer. Caused by demand signal processing, order batching, price fluctuations, and rationing/shortage gaming.
When to Use
Trigger conditions:
- Diagnosing why supplier orders are far more volatile than end-consumer demand
- Quantifying demand amplification across supply chain tiers
- Designing strategies to reduce order variability
When NOT to use:
- When demand is genuinely volatile (not amplified) — the issue is demand forecasting
- For single-echelon inventory optimization (use EOQ or safety stock)
Algorithm
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