The Bullwhip Effect - Assignment Example

The Bullwhip Effect is of great concern because it can lead to low profits, increased costs, poor use of transport and storage facilities, inefficiency in the use of limited resources and even crisis in placing orders. All these reasons explain why this is a great area of interest (Bhattacharya & Bandyopadhyay, 2011). It is also a significant area that should be studied in order to increase efficiency in how enterprises carry their day to day activities. I am also interested in this topic because I would like to contribute to its solution.

Moreover, an aspect of academic curiosity sparked my interest in the topic. The research conducted shows a number of similarities with what I learned in the Module. For instance, the definition of the Bullwhip Effect tends to be the same. Even the environment and circumstances in which it occurs is very similar. For both, the phenomenon occurs in a supply chain where there are members placing orders to each subsequent member in the upstream. In both, the fact that Bullwhip Effect results in an increased or exaggerated variability in the upstream end more than the downstream is recognized.

The Bullwhip effect arises as a result of various factors. Some of the causes are rationing and shortage gaming, price fluctuations, demand forecast, updating and order batching. These causes coupled up with the manager’s decisions, most of which are rational, lead to the Bullwhip Effect. Forecasts made based on information from the member down the stream lead to amplification of demand. Dependence on these downstream pieces of information to plan for inventory often misleads. As such, many upstream members end up having a greater variability of demand (Lee et al., 2014). Another cause is the frequent change in prices in the market.

Sometimes the manufacturers reduce the prices of their products. This makes more suppliers in the downstream end to do ‘forward buying’. This is in a