What term describes the phenomenon of increasing order fluctuation as they move through a supply chain?

The phenomenon of increasing order fluctuation as they move through a supply chain is referred to as the Bullwhip Effect. This effect illustrates how small changes in consumer demand at the retail level can cause larger and larger fluctuations in demand as these orders are relayed up the supply chain to manufacturers and suppliers. Each entity in the supply chain, reacting to their perception of demand, tends to overreact to changes, leading to compounded fluctuations in orders.

Understanding the Bullwhip Effect is critical for supply chain management because it can result in inefficiencies, such as excessive inventory, increased costs, and missed service levels. By managing this effect, companies can strive for a more stable and synchronized supply chain, ultimately improving overall performance and customer satisfaction.

The other terms, while relevant to supply chain management, do not specifically capture the dynamic of increasing order variability as you move upstream in the supply chain. Vendor-managed inventory involves suppliers taking responsibility for managing inventory levels, postponement is a strategy to delay production decisions and drop shipping refers to the direct shipment of goods from suppliers to customers without handling them in between. None of these terms describe the fluctuation phenomenon that the Bullwhip Effect does.