It refers to the scenario where the orders to the supplier tend to have larger
fluctuations than sales to the buyer. This distortion subsequently propagates
upstream in an amplified form. Generally speaking, the further upstream the
echelon, the more distorted and amplified is the waveform. Lee et al. (1997a, b)
state that there are five fundamental causes of bullwhip; non-zero lead-times,
demand signalling processing, price variations, rationing and gaming and
order batching. In any practical supply chain these may all be present and
interact as shown in Figure 2. Note that we consider both zero lead-time and
demand signal processing to be the essence of the well-known Forrester effect
(Forrester, 1961). It is our intention in this paper to show how each of these
bullwhip sources is affected by the introduction of VMI. This will be done
using a dynamic model of a particular VMI system capable of representing
current industrial practice.