The bullwhip effect is a supply chain phenomenon describing how small fluctuations in demand at the retail level can cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer, and raw material supplier levels. This amplification of demand variability is primarily caused by a lack of visibility and poor communication between supply chain partners. Each partner makes forecasts based on the orders they receive, not the end-customer demand, leading them to carry "safety stock" or excess inventory to compensate for the uncertainty. This results in stockpiling and inefficiency throughout the supply chain.

B. This describes a mitigation strategy for the bullwhip effect, often called supply chain visibility, which is the opposite of the problem itself.

C. This defines the "maker movement" or "prosumerism," a cultural trend unrelated to supply chain demand amplification.

D. This is the definition of the "network effect" (or Metcalfe's Law), where a service's value increases as more people use it.

1. Lee

H. L.

Padmanabhan

V.

& Whang

S. (1997). The Bullwhip Effect in Supply Chains. Sloan Management Review

38(3)

93–102. In the introduction (p. 93)

the authors state

"this variance amplification of demand orders up the supply chain is reminiscent of a cracking bullwhip... leading to excessive inventory."

2. MIT OpenCourseWare. (2010). 15.762 Supply Chain Planning

Lecture 10: The Bullwhip Effect. Massachusetts Institute of Technology. The lecture notes define the effect as "The phenomenon that the variability of the orders is larger than that of the sales" and list "Demand Signal Processing" (forecasting based on orders rather than end-user demand) as a primary cause.

3. Croson

R.

& Donohue

K. (2006). Behavioral causes of the bullwhip effect and the observed value of inventory information. Management Science

52(3)

323-336. https://doi.org/10.1287/mnsc.1050.0436. The abstract discusses how individual ordering behavior in response to demand signals

without full information

contributes to the bullwhip effect and excess inventory costs.