See how a tiny 10% spike in consumer demand creates violent, delayed oscillations across global warehouses and factories.
Information and physical goods travel at different speeds. When a retail store sees a sudden spike in sales, they panic and order extra. The regional warehouse sees that panic, and they order even more from the factory to be safe.
Because physical shipping takes time, the factory ends up massively overproducing long after consumer demand has returned to normal.
A simple lookup table applies a small demand shock. Retailers immediately over-correct their purchasing orders.
The root cause of the chaos. By the time physical goods cross the ocean, the information they were based on is outdated.
The factory receives massively distorted order signals from the warehouse, causing an exaggerated boom-and-bust cycle.
Check this: The
Demand_Lookuptable value of 100 at 100th hour, notice the increase in inventory due to high customer demand after 100th hour. Compare that flat line to the wild oscillations happening in theFactory_Inventorystock.Try this: Decrease the
Retail_Shipping_DelayandWarehouse_Shipping_Delay. Notice how improving logistical speed instantly dampens the severity of the bullwhip effect.
You have now seen system dynamics applied across a variety of disciplines, from localized game mechanics to global macroeconomics. The engine behind them all is exactly the same.