Changes

==Example==

==Example==

If a retailer typically sells about two pallets of paper towels each month, their supply chain is well accustomed to that level of demand. However, if for some reason the retailer suddenly sells twice that amount (due to discounts, environmental conditions, panic buying, etc.), problems can occur. The retailer will often keep a small surplus on hand (called a "safety stock"), to ensure that they do not run out. However, holding onto excess inventory is waste of money, so this will typically be a small amount. Some retails keep virtually no surplus on hand. When the demand increases, the retailer's buffer stock is quickly depleted, and they must order more from their regional distributor. They need to buy enough to restock their shelves, replenish their depleted buffer, and get enough of an excess to continue providing for the increased demand. Their distributor is now surprised by an order coming in earlier than expected, for not one or two pallets, but six. The distributor will also have a buffer stock, but again, only a limited amount.  They will fulfill this order, but now have their own inventory running lower than expected. They can also predict that based on this new, large order, there will be more large orders coming, not only from this retailer, but probably from others as well.  So, the distributor orders an extra twenty pallets from their distributor, and the process of amplification continues.<ref name="tradegecko">https://www.tradegecko.com/inventory-management/bullwhip-effect</ref><ref name="marketing91">https://www.marketing91.com/bullwhip-effect/</ref><ref name="onlinemasters.ohio.edu">https://onlinemasters.ohio.edu/blog/how-the-bullwhip-effect-impacts-the-supply-chain/</ref>

If a retailer typically sells about two pallets of paper towels each month, their supply chain is well accustomed to that level of demand. However, if for some reason the retailer suddenly sells twice that amount (due to discounts, environmental conditions, panic buying, etc.), problems can occur. The retailer will often keep a small surplus on hand (called a "safety stock"), to ensure that they do not run out. However, holding onto excess inventory is waste of money, so this will typically be a small amount. Some retails keep virtually no surplus on hand. When the demand increases, the retailer's buffer stock is quickly depleted, and they must order more from their regional distributor. They need to buy enough to restock their shelves, replenish their depleted buffer, and get enough of an excess to continue providing for the increased demand. Their distributor is now surprised by an order coming in earlier than expected, for not one or two pallets, but six. The distributor will also have a buffer stock, but again, only a limited amount.  They will fulfill this order, but now have their own inventory running lower than expected. They can also predict that based on this new, large order, there will be more large orders coming, not only from this retailer, but probably from others as well.  So, the distributor orders an extra twenty pallets from their distributor, and the process of amplification continues.<ref name="tradegecko">https://www.tradegecko.com/inventory-management/bullwhip-effect</ref><ref name="marketing91">https://www.marketing91.com/bullwhip-effect/</ref><ref name="onlinemasters.ohio.edu">https://onlinemasters.ohio.edu/blog/how-the-bullwhip-effect-impacts-the-supply-chain/</ref>

After several steps through the chain of distributors and warehouses, the manufacturer is suddenly surprised with an order for sixty extra pallets of paper towels, as each supplier and distributor is attempting to increase their buffer and keep up with demand. The manufacturer will be somewhat limited in how much they can increase production, but they will do what they can to meet the demand. To do this, they will need more wood pulp, so they make an unusually large order of wood pulp from their supplier.  This results in their supplier making an unusually larger order of wood chips and timber from their suppliers. The result is that there is suddenly a very significant spike in demand for logging, due mostly to a retailer or two selling many more paper towels than usual.<ref name="tradegecko">https://www.tradegecko.com/inventory-management/bullwhip-effect</ref><ref name="marketing91">https://www.marketing91.com/bullwhip-effect/</ref><ref name="onlinemasters.ohio.edu">https://onlinemasters.ohio.edu/blog/how-the-bullwhip-effect-impacts-the-supply-chain/</ref>

After several steps through the chain of distributors and warehouses, the manufacturer is suddenly surprised with an order for sixty extra pallets of paper towels, as each supplier and distributor is attempting to increase their buffer and keep up with demand. The manufacturer will be somewhat limited in how much they can increase production, but they will do what they can to meet the demand. To do this, they will need more wood pulp, so they make an unusually large order for wood pulp from their supplier.  This results in their supplier making an unusually larger order for wood chips and timber from their suppliers. Now there is suddenly a very significant spike in demand for logging, due mostly to a retailer or two selling many more paper towels than usual.<ref name="tradegecko">https://www.tradegecko.com/inventory-management/bullwhip-effect</ref><ref name="marketing91">https://www.marketing91.com/bullwhip-effect/</ref><ref name="onlinemasters.ohio.edu">https://onlinemasters.ohio.edu/blog/how-the-bullwhip-effect-impacts-the-supply-chain/</ref>

Eventually the demand will diminish, so much so that demand falls below the norm. This will result in overstocking and excess production. To deal reduce the surplus, the suppliers will probably offer a discount on paper towels, leading the retailers to also put paper towels on sale. Eventually, the demand and supply will stabilize.

Eventually the demand will diminish, so much so that demand falls below the norm. This will result in overstocking and excess production. To deal reduce the surplus, the suppliers will probably offer a discount on paper towels, leading the retailers to also put paper towels on sale. Eventually, the demand and supply will stabilize.

==See also==

==See also==