The bullwhip effect describes the amplification of order variability up the supply chain due to forecasting.

The bullwhip effect describes the amplification of order variability up the supply chain due to forecasting.

• A. Bullwhip effect
• B. Seasonal adjustment
• C. Demand pull
• D. Reorder point

Answer: (A)

The main idea here is how small shifts in what customers want can become much bigger swings as information moves upstream in the supply chain. The bullwhip effect captures this exactly: when each stage bases its orders on forecasts and past orders rather than on actual end-customer demand, both the forecast updates and the desire to buffer against uncertainty (safety stock) cause order sizes to become increasingly larger and more erratic as you go from retailer to wholesaler to manufacturer. That amplification happens because delays, batch ordering, and price promotions distort the signal from the market, so upstream players react more strongly than the original change in demand. Seasonal adjustment, by contrast, is about removing regular seasonal patterns from data, not about how orders become more variable up the chain. Demand pull describes a system where production responds to actual demand signals, which tends to reduce variance created by forecasting, rather than explain its amplification. Reorder point is simply the inventory trigger for replenishment and doesn’t describe the chain-wide amplification phenomenon.

The main idea here is how small shifts in what customers want can become much bigger swings as information moves upstream in the supply chain. The bullwhip effect captures this exactly: when each stage bases its orders on forecasts and past orders rather than on actual end-customer demand, both the forecast updates and the desire to buffer against uncertainty (safety stock) cause order sizes to become increasingly larger and more erratic as you go from retailer to wholesaler to manufacturer. That amplification happens because delays, batch ordering, and price promotions distort the signal from the market, so upstream players react more strongly than the original change in demand.

Seasonal adjustment, by contrast, is about removing regular seasonal patterns from data, not about how orders become more variable up the chain. Demand pull describes a system where production responds to actual demand signals, which tends to reduce variance created by forecasting, rather than explain its amplification. Reorder point is simply the inventory trigger for replenishment and doesn’t describe the chain-wide amplification phenomenon.