The bullwhip effect (BWE) is one of the most important ideas in operations management. First publicized by researchers Hau L. Lee, V. Padmanabhan, and Seungjin Whang in an MIT Sloan Management Review article in 1997, the hypothesis has become something every student of supply chains must understand. As illustrated in Figure 1 below, BWE refers to a situation in which naturally occurring product demand volatility at the end-consumer level is magnified by each stage of the product's supply chain. When BWE is present, the consumer's decisions reverberate all the way to the last stage of the supply chain, with volatility increasing at each step of the way.

Figure 1: The “bullwhip effect” as demand volatility increased upstream in the supply chain. (Source: IMD)

There are endless articles, papers, and even YouTube videos about BWE, and a common feature of the literature is that the phenomenon is described from the point of view of a single sequence from customer to retailer to manufacturer to supplier(s), i.e., as an "intra-firm" process. This is an odd phenomenon, given that almost every supply chain is really a supply network that involves multiple parallel nodes. For example, an automotive manufacturer often buys the same part from multiple suppliers, moves that part with various transportation vendors, and ultimately sells a car at multiple retail points. These are complex inter-firm structures in which a product's demand volatility diffuses in parallel as well as serial dimensions. This observation raises an important question: does BWE work in the same way when considered from the inter-firm perspective as it does in the common intra-firm context? This is not just a theoretical question, of course. There are many suggested technological, mathematical, and process solutions for BWE, generally based on the intra-firm view. If BWE is indeed different in the inter-firm context and aligns more closely with the real world, then the existing understanding of BWE and associated solution set may need to be revised.