Introduction:
In Present scenario Customers want more quality, design, innovation, choice, convenience and service, and they want to spend less money and effort. Also, making optimal decision under uncertain conditions is a challenging task for industries. In industries the supply chain consists of so many layers but managers make decisions on the basis of localized information and decisions are hidden from other members of the chain. This creates the information distortion; the gap between the forecast and reality is large and leads to product shortfalls or inventory excess. This variation in demand–delivery cycle is called bullwhip effect. It is an important phenomenon in supply chains.
As one moves up in a supply chain i.e. away from the consumer demand the volatility in demand increases. Customer demand is rarely stable, manufacturer must forecast demand to fulfill the requirement of customers. But forecast may or may not be true and error arises. This effect is also known as whiplash or whipsaw effect and it can be reduced if actual demand of customer goes to supplier. Then the supplier can adjust their production schedule and as a result; inventory reduced significantly. The bullwhip phenomenon was first described by Forrestor in 1958, after that in 1980’s, it is identified through simulation approach. It is well-researched topic in the area of Supply Chain Management. Now a day’s large amount of literature is available on bullwhip effect and its impact on the supply chain performance.
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