A: Bullwhip effect refers to the phenomenon that the demand changes continuously along the upstream of the supply chain. Resulting in a large increase in safety stocks.

In addition to the bullwhip effect caused by bulk orders, lead time and price fluctuation also contribute to the bullwhip effect. Due to the constant amplification of demand changes at all levels, the safety stock increases upstream along the supply chain and accumulates a large number of stocks that exceed the market demand. Controlling the "bullwhip effect" has a decisive influence on greatly reducing inventory (safety inventory). There are three main ways to solve the "bullwhip effect":

The first method is to estimate the change of demand without the order at the next higher level, but to use information technology to present the market demand information to all levels of the supply chain, so that all levels can determine the order size and safety inventory according to the market demand.

The second method is to reduce the series of supply chain, so that the "bullwhip" is so short that the "bullwhip effect" is not obvious.

The third method is to use the inventory managed by the seller to fundamentally eliminate the "bullwhip effect"