Paper Example on Bullwhip Effect

Published: 2021-06-25
1369 words
5 pages
12 min to read
University of Richmond
Type of paper: 
Research paper
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The bullwhip effect is defined as a supply chain or distributional channel effect, where manufacturers and suppliers orders result in sales variances in comparison to the sales of consumers (Lin, Jiang, Liu & Wang, 2014). Usually, the differences are not distinct in the early stages of the supply chain. However, moving higher up, the supply chain variances become more and more elaborate (Jaipuria & Mahapatra, 2014). The bullwhip effect is caused by a variety of factors that include; poor communication, variations in price, policies on free returns, and order batching. The bullwhip effect often results in production inefficiencies and excessive inventory. These inefficiencies in production are as a result of the producers demand to fulfill the need of their customers, thereby underutilizing the supply chain (Mangan, Lalwani, & Lalwani, 2016).


Most pieces of literature identify the bullwhip effect as a problem affecting the product(s)' supply chain. According to Lin et al., the bullwhip is analogous to an actual whip where the effects are amplified towards the end, in this case, the consumer. Furthermore, a review of the literature identifies excessive inventory and production inefficiencies as key outcomes of the bullwhip effect.

The causes of the bullwhip were similar across all the texts. These were disorganization, policies on free returns, improper communication, order batches, and variations in price. Moreover, Jaipuria & Mahapatra (2014) provide a precise statistical analysis of the phenomenon based on real time data. Lastly, the remedies of the bullwhip effect are; proper interpretation of demand forecasts, breaking order batches, reducing hoarding and artificial shortages and stabilizing prices.

Advantages and Disadvantages of the Bullwhip Effect

For producers, the bullwhip effect results in production inefficacies, which lead to the reduced profit margins. Furthermore, their uncertainties of consumer demand may also lead to overproduction or underproduction of a product. The lack of proper consumer demand information often results in product shortages and shortages in stocks. In addition to that, the constant fluctuations in demand often force producers to ration their products. For the consumer, the bullwhip effect results in cancellations, shortages and rationings.

Although the bullwhip effect is mostly disadvantageous, it does have some advantages. The producers gain a valuable understanding of the demand market and are therefore able to plan their production effectively. Furthermore, the producers will learn of the inefficiencies in their supply chain enabling them to plan for intervention measures. The consumers can understand and predict possible rationing or shortages of a product and therefore plan their purchasing.


The literature by Jaipuria and Mahapatra (2014) and Lin et al. (2014) describe the bullwhip effect as a supply chain problem. The bullwhip effect results in swings in inventory and inefficient production and supply moving towards the consumer. It elucidates the causes of the bullwhip effect to be both behavioral and operational. Generally, these causes are fluctuations in prices, order batching, and lack of information. Lastly, these papers describe the possible remedies for the bullwhip effect as; reducing or eliminating shortage gaming, stabilizing prices and having proper demand information and forecasts.

Biblical Integration.

In the book of Hosea chapter four and verse six, the Bible describes the destruction of Hosea's people due to their lack of knowledge. Supply chain management works in the same manner. Without sufficient knowledge of consumer demands, producers and suppliers are unable to plan their inventory accurately. This lack of planning leads to excessive inventory, wastage and inefficiencies in production.


Understanding how the bullwhip effect works is important for producers and suppliers. Most businesses and organizations have put in place measures and strategies to analyze and alleviate the bullwhip effects (Jaipuria & Mahapatra, 2014). The continuous replenishment program (CRP) is one such program. This program is used by many companies such as Nestle, P&G, and Campbell Soup. CRP enables processing of data on a repetitive basis and availing it to all sites.

Customer Relationship Management Systems

Customer relationship management (CRM) is defined as a management approach aimed at gauging a companys interaction with its current as well as future employees (Fournier, 2013). Customer relationship management involves analysis of the history of the companys customers to understand trends so as to improve the companys relationship and interaction with its clients. The main benefit of customer relationship management is, therefore, the retention of customer loyalty, establishment of new clients and improvement in sales (Saarijarvi, Karjaluoto, & Kuusela, 2013). Generally, customer relationship management is divided into three components, including customer service, sales force automation, and campaign management.


The definitions provided in the literature by Fournier (2013) and Saarijavi et al. (2013) bear noticeable similarities with the textbook definition of customer relationship management. The fundamental idea brought out in these definitions is the importance of a company to create proper relationships with customers. A good customer relationship results in customer loyalty, efficient cross-sells or up-sell of products and market optimization. However, CRM does possess some disadvantages which include the need for extensive training, addition workload, and the need for a continuous upgrade, updates, and maintenance.

Advantages and Disadvantages of Customer Relationship Management Systems

Customer relationship management systems (CRM), improves customer relations between the company and its customer. CRM enables the company to understand customer need in order to improve customer satisfaction (Fournier, 2013). By adopting the CRM strategies, businesses can significantly improve their revenues. Market optimization is also another benefit of using CRM. With a clear understanding of customer needs, a business is able to plan their marketing strategies effectively by timing when consumers mostly need a particular product (Fournier, 2013).

Although the benefits of CRM outweigh the demerits, a few disadvantages exist. Proper training is required for the staff to utilize CRM strategies and systems entirely. Furthermore, the requirements approach creates a bigger workload burden on the company staff. Updates on customer information, systems upgrades, and constant maintenance are not expensive but also time-consuming (Saarijarvi, Karjaluoto, & Kuusela, 2013). Lastly, in some circumstances, CRM may be difficult to integrate with other management systems.


The literature by Saarijarvi, Karjaluoto and Kuusela (2013) describes customer relationship management as strategies, technologies and practices adopted by businesses and organizations to adequately manage relationships with their clients. Customer relationship management (CRM), involves market automation, sales force automation, a contact center automation. These activities are aimed at achieving benefits which include; market optimization, improvement in upselling and cross-selling of products, improved customer relations and better revenues. However, CRM does have disadvantages. Difficulty in integrating into pre-existing management systems, the constant need for updates, upgrades and maintenance, and increased workload are listed as some key disadvantages.

Biblical Integration

The concept of customer relationship management is similar to the story of Jesus Christ in the New Testament. Jesus was able to spread his message and maintain his disciples because he understood the needs of the people around him. The story of Jesus turning a few fish and bread into quantity enough to feed his congregation is an illustration. Jesus knew that without feeding the masses, his message would not pass through. Similar to CRM to better serve customers, it is important first to understand them.


E-CRM is slowly catching up in modern day customer relationship management. E-CRM makes use of the widespread influence of the internet to facilitate an effective customer relations. E-CRM utilizes electronic data gathering techniques to capture and analyze customer data and to obtain the necessary information. E-CRM attempts to answer the questions of topic, time and quantity that will most satisfy the consumers (Mekkamol, Piewdang, & Untachai, 2013).



Fournier, S. (2013). Secrets of customer relationship management: its all about how you make them feel. Journal of Services Marketing.

Jaipuria, S., & Mahapatra, S. S. (2014). An improved demand forecasting method to reduce bullwhip effect in supply chains. Expert Systems with Applications, 41(5), 2395-2408.

Lin, W. J., Jiang, Z. B., Liu, R., & Wang, L. (2014). The bullwhip effect in a hybrid supply chain. International Journal of Production Research, 52(7), 2062-2084.

Mangan, J., Lalwani, C., & Lalwani, C. L. (2016). Global logistics and supply chain management. John Wiley & Sons.

Mekkamol, P., Piewdang, S., & Untachai, S. (2013). Modeling e-CRM for community tourism in Upper Northeastern Thailand. Procedia-Social and Behavioral Sciences, 88, 108-117.

Mekkamol, P., Piewdang, S., & Untachai, S. (2013). Modeling e-CRM for community tourism in Upper Northeastern Thailand. Procedia-Social and Behavioral Sciences, 88, 108-117.

Saarijarvi, H., Karjaluoto, H., & Kuusela, H. (2013). Customer relationship management: the evolving role of customer data. Marketing intelligence & planning, 31(6), 584-600.


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