Question

What is the bullwhip effect and how can it affect a supply chain and a firm's profitability?

Answer 1

Bullwhip effect is the phenomenon where the forecasts abouth the firm seem to go wrong once we start moving above the supply chian. It is same like a whip where the wavelength will be less at the tip and it goes on increases as we go far from the tip. Due to this the supply chain will get inconsistent because the inventory might get insufficient or the production might get ineffective. Both of these will effect the profits of the firm as money and material might get wasted.