The bullwhip effect describes how a small change in end customer demand amplifies disruptions upstream through the supply chain.  This helps to explain much of today’s global supply chain disruptions, where we see excessive new orders from purchasing managers to re-build inventory levels.

Source: Bloomberg, Macrobond, Variant Perception

MIT’s Beer Game shows how humans are the weakest link in supply chains. The game models supply and demand dynamics across the industry (brewery, distributor, wholesaler and retailer).  Students ended up panic-buying cases of beer in response to a small demand shock, as Bloomberg writes here.

 

Get the full picture at variantperception.com.