The result of this effect is increased cost and poorer service. Sources of variability can be demand variability, quality problems, strikes, plant fires, etc. Variability coupled with time delays in the transmission of information up the supply chain and time delays in manufacturing and shipping goods down the supply chain create the bullwhip effect. No coordination up and down the supply chain Delay times for information and material flow Order batching - Larger orders result in more variance. Order batching occurs in an effort to reduce ordering costs, to take advantage of transportation economics such as full truck load economies, and to benefit from sales incentives.
Promotions often result in forward buying to benefit more from the lower prices.
The result is no visibility of true customer demand. While the bullwhip effect is a common problem, many leading companies have been able to overcome it by applying countermeasures to its causes. Full truck load economics are countered with third-party logistics and assorted truckloads. Random or correlated ordering is countered with regular delivery appointments. More frequent ordering results in smaller orders and smaller variance.