The Bullwhip effect has a negative
impact on the supply chain in
two respects:
• Variation in inventory
level: The demand variability
leads to variation in the
inventory level itself. Local,
non-optimal decisions to
carry excess inventory and
safety stocks to meet service
levels dominate the supply
chain. The stronger the
bullwhip effect is in a supply
chain, the higher safety stock
is required. Higher inventory
levels result in higher costs
and significant risk at these
facilities.