07/19/2022
Wrangling supply chains ain't easy.
The same forces that snarled the supply chain for chips are the ones that also led to desperate shortages of toilet paper and bicycles. It’s an economic phenomenon called “the bullwhip effect.”
The phrase was coined by a professor researching why the supply chain for diapers experiences wild swings in order volumes even though consumers buy diapers at a relatively constant rate. Turns out even small changes in demand for diapers triggered larger changes in retailers’ wholesale orders, which set off even bigger swings in manufacturers’ demand for the materials to manufacture diapers. Sort of like a cowboy cracking a bullwhip, small motion can have big impacts.