Ged Carroll

Bullwhip effect aka Forrester effect

Published: in business | 商業 | 상업 | ビジネス, economics | 經濟學 | 경제학 | 経済, ideas | 想法 | 생각 | 考える, innovation | 革新 | 독창성 | 改変, jargon watch | 術語定義 | 용어의 정의 | 用語の定義, technology | 技術 | 기술 | テクノロジー by .

Reading Time: 2 minutes

Bullwhip effect

I came across the bullwhip effect as a descriptor recently in discussions around the global chip shortage. Bullwhip effect is a concept that is well known in supply chain circles.

The bullwhip effect is also known as the Forrester effect. Disruption ripples back from the retailer, through the wholesaler, manufacturer, on to their suppliers and so on.

The usual causes for the effect are:

My, what a big holster you have.

What caused the global chip shortage that is driving the bullwhip effect?

There were three causes to the global chip shortage

  1. Partial shutdown – The semiconductor industry went through a partial shutdown because of the COVID-19 epidemic. This meant that there was a smaller supply of chips.
  2. Unusual increase in demand – Home working drove an increase in demand: increased sales in PCs, wi-fi routers, external hard drives, mice, keyboards, printers and so on. There was also a corresponding increase in home entertainment as consumers upgraded smart TVs, Apple and Roku set top boxes. This all coincided with the launch of the next generation of gaming consoles by Sony and Microsoft – which can usually drive a squeeze on their own
  3. Supply chain disruption – A fire in Japan at Renesas Electronics. A trade war affecting Chinese semiconductor manufacturers. Freezing winter weather in Texas disrupting employees and their businesses. Now there is a drought in Taiwan affecting TSMC – the world’s largest semiconductor foundries

More related posts here.

More information

Chip shortage is starting to have major real-world consequences 

Global chip shortage: everything you need to know | CAR Magazine

The global semiconductor shortage can be explained by the bullwhip effect 

Chip industry pressures spur Renesas to diversify | Financial Times

Taiwan’s chip industry under threat as drought turns critical | Financial Times

Texas winter storm blackouts hit chip production | Financial Times