What distortion in information is described as it passes across the supply chain?

The bullwhip effect is the distortion in information that occurs as data moves across the supply chain. This phenomenon happens when small fluctuations in demand at the consumer level lead to larger and larger fluctuations in demand at the wholesaler, distributor, and manufacturer levels.

As information travels through the various tiers of the supply chain, each level interprets the data based on its own context, often leading to overreactions to demand changes. This results in amplified fluctuations in orders, which can cause inefficiencies, excess inventory, and ultimately, increased costs.

The nature of the bullwhip effect illustrates how sensitive the supply chain can be to minor changes in consumer behavior and how critical it is to maintain accurate communication and manage inventory effectively throughout the entire chain to mitigate these distorting effects. Understanding this concept is essential for improving supply chain management and ensuring smoother operational flows.