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# Information Distortion in a Supply Chain: The Bullwhip Effect

## Details

**Authors** Hau L. Lee, V. Padmanabhan, Seungjin Whang

**Year** 1997

**Publisher** Management Science

**Kind of work** article

**Discipline** Operations Research

**Applied** false

[Read it at the publisher](https://doi.org/10.1287/mnsc.43.4.546) 
10.1287/mnsc.43.4.546

## In authors' words

### Abstract

Consider a series of companies in a supply chain, each of whom orders from its immediate upstream member. In this setting, inbound orders from a downstream member serve as a valuable informational input to upstream production and inventory decisions. This paper claims that the information transferred in the form of "orders" tends to be distorted and can misguide upstream members in their inventory and production decisions. In particular, the variance of orders may be larger than that of sales, and the distortion tends to increase as one moves upstream—a phenomenon termed "bullwhip effect." This paper analyzes four sources of the bullwhip effect: demand signal processing, rationing game, order batching, and price variations. Actions that can be taken to mitigate the detrimental impact of this distortion are also discussed.

### What they set out to do (purpose)

To explain why order variability increases at each successive upstream stage of a supply chain even when end-customer demand is stable, and identify the causes of this 'bullwhip effect.'

### Who or what was studied (sample)

Analytical model of a multi-echelon supply chain (retailer, distributor, manufacturer, supplier), illustrated with industry examples such as Procter & Gamble's diaper supply chain.

### How they did it (methods)

Analytical modeling of order and demand information flow across supply chain tiers, identifying four causal mechanisms: demand signal processing, rationing games, order batching, and price fluctuations.

### What they found (results)

Order quantity variance increases systematically at each successive upstream tier of a supply chain relative to actual end-customer demand, driven by four identifiable mechanisms, with the distortion compounding as it moves farther from the point of sale.

## Commentary

### In short

Each tier of a supply chain reacts to the distorted order signal from the tier immediately below it rather than to true end demand, so variability compounds moving up the chain and the whole chain's behavior is not the simple sum of any one tier's response.

**Patterns it shows** S, R

**Added** 2026-09-21

**How to cite this** Hau L. Lee, V. Padmanabhan, Seungjin Whang (1997). Information Distortion in a Supply Chain: The Bullwhip Effect. Management Science.