A supermarket notices that customers bought slightly more...

A supermarket notices that customers bought slightly more bottled water this week. The store manager assumes demand is rising, so the store orders twenty percent extra from the distributor. The distributor sees several stores increasing orders and assumes a major demand spike is coming. It orders forty percent extra from the warehouse. The warehouse reacts even more aggressively and asks the factory to double production. But actual customer demand increased only slightly. Now trucks, warehouses, and stores are filled with excess inventory. This is called the bullwhip effect: a small change in customer demand becomes a much larger disruption as information travels backward through the supply chain. The solution is better demand data, smaller order batches, and direct communication between stores, distributors, and manufacturers.