Small changes in end demand amplify into large swings further up a supply chain.
Small retail fluctuations become large factory swings because each tier orders extra to cover its own uncertainty. The MIT Beer Game was built in the 1960s to demonstrate it, and players reproduce it reliably.
In practice
- A retailer's 5% dip in weekly sales becomes a 15% cut in orders, a 30% cut at the distributor and an idle production line.
- A team's slightly reduced hiring plan reaches the recruitment agency as a freeze and the agency stops sourcing entirely.
- Further reading
- Wikipedia
- Subject
- Design & Systems
- Essay
- The limits every design runs into