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.supply chain management, information distortion, information integration, production and inventory management

(This article originally appeared in Management Science, April 1997, Volume 43, Number 4, pp. 546--558, published by The Institute of Management Sciences.) 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 ÜordersÝ 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 distortion tends to increase as one moves upstreamÔa phenomenon termed Übullwhip effect.Ý 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.supply chain management, information distortion, information integration, production and inventory management

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The adoption of information technology (IT) in organizations has been growing at a rapid pace. The use of the technology has evolved from the automation of structured processes to systems that are truly revolutionary in that they introduce change into fundamental business procedures. Indeed, it is believed that “More than being helped by computers, companies will live by them, shaping strategy and structure to fit new information technology [25].” While the importance of the relationship between information technology and organizational change is evidenced by the considerable literature on the subject, 1 there is a lack of comprehensive analysis of these issues from the economic perspective. The aim of this article is to develop an economic understanding of how information systems affect some key measures of organization structure.

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