The bullwhip effect increases upstream order variability.

Question

BlackTom AI · Accepted Answer

The bullwhip effect describes how variability in demand is amplified as it moves upstream through the supply chain, from retailers to wholesalers, distributors, and suppliers.
Option 1: '1) True' is correct because upstream components typically experience greater fluctuation in orders than end customers, due to forecasting adjustments, order batching, and reactions to perceived demand changes.
Option 2: '2) False' is incorrect because stating that the bullwhip effect does not increase upstream variability contradicts the well-established observation that variability magnifies as orders propagate upstream, not remains constant or diminishes.
To connect the ideas: when a retailer experiences a small change in customer demand, they pace orders, adjust forecasts, and sometimes offer promotions, all of which can exaggerate the signal sent to the supplier. This amplification propagates upstream, resulting in higher variability for suppliers than for end customers, which is the essence of the bullwhip effect.
In short, the defining characteristic of the bullwhip effect is the rising order variability as you move upstream, making the statement in option 1 accurate and option 2 inaccurate.

The bullwhip effect increases upstream order variability.

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