What is the effect of sharing demand data on the bullwhip effect?

• A. Increases bullwhip effect
• B. Reduces bullwhip effect and improves planning
• C. Has no impact
• D. Increases forecasting error

Answer: (D)

Sharing demand data across the supply chain gives everyone a clearer view of actual customer demand. The bullwhip effect arises because each stage forecasts based on the orders it receives, leading to amplified fluctuations as information moves upstream. When demand signals are shared, forecasts become more accurate, planning is more synchronized, and ordering can be steadier, reducing the push-pull swings that cause inventories to balloon or stockouts to occur. In practice, this visibility dampens oscillations, aligns production and inventory with real demand, and improves overall planning. So the impact is a reduction in the bullwhip effect and better planning, rather than any increase in fluctuations or forecasting error.