Question

With respect to the Bullwhip effect, please discuss in your own words on what order amplification and is and why purchasers will use it.

Answer 1

The Bullwhip effect shows that the manufacturers' orders and the suppliers in the supply chain create more variance than the orders to the end consumers. The supply chain variance can act as a hurdle or barrier to the growth in the supply chain. The supply chain management requires no hindrances and hurdles. The bullwhip effect or variance occurs when there is a lack of communication or increased disorganizations between the supplier and the company. Moreover, the customers can overstate their demand when they have an apprehension of shortages, and they might cancel later when they know that the supplier has ample products. The concept of order amplification comes into play because the consumers first order in large quantities, which leads to the increase in sales, and then they decrease the quantities when they think that the supplier is self-sufficient. It also causes much waste because of sudden supply swings in the company. The concept also demands amplification because of a sudden increase and a sudden decrease in the products' demand. The purchasers use it as a safety mechanism. They already order a considerable amount of products or services because of the apprehension of less supply. If there is a short supply, the purchaser is at the benefit. In case there is ample supply, the consumers cancel the order, and decreases the demand. Hence, it is beneficial for the consumer.