For instance, if production level in period one was below that requested, the production order for the following period would be exaggerated to make up the shortfall from the period one and possibly in anticipation of potential further shortfalls in period two.
Owing to the upstream member’s variability in producing items, the volume of usable products received by any downstream member varies.
Variability at the production level is thus the initial trigger of demand variability, which in turn creates the bullwhip effect.
In addition to these possible causes, he discussed the downstream members’ stock policy aimed at minimizing their inventories.
He argued that the bullwhip effect could be caused by simply passing inventory holding responsibility to the upstream members.
This downstream members’ expectation may translate into a myopic view of the supply chain when managing inventories.