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# Bullwhip Effect

## Definition

The amplification of demand variability as signals travel upstream in a
supply chain, such that small fluctuations at the retail level produce
progressively larger swings in orders at distributor, manufacturer, and
supplier levels. The amplification arises from batching, safety stock
additions at each tier, and the use of lagged signals rather than
real-time demand data. The result is a chain that oscillates between glut
and shortage even when end-consumer demand is relatively stable.

## Source

Coordination Mechanisms in Modern Supply Chains, §The Bullwhip Effect

## Supply Chain Domain

Coordination

## VSM Assignment

S2 — The bullwhip effect is a failure of S2 (the anti-oscillation
coordination layer). A functioning S2 dampens variance; the bullwhip
effect describes what happens when S2 is absent or degraded.

## WoN Concept

Natural Price as Central Price — Smith describes market price as oscillating
around natural price as a centre of gravity. The bullwhip effect is an
analogous oscillation: orders oscillate around actual demand rather than
converging to it, because the information infrastructure required for
convergence (transparent, real-time demand signals) is missing.
