Information Distortion In Supply Chains docx.

Information Distortion In Supply Chains 1
INFORMATION DISTORTION IN SUPPLY CHAINS
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Information Distortion In Supply Chains 2
Information distortion in supply chain
A supply chain is a combination of processes, structures, and resources that facilitate the
production and flow of a commodity from supplier to consumer. Communication and
coordination within the supply chain are of critical importance as it is the only way the supplier
can understand customer and retailer interests and, in turn, incorporate it in production.
Information distortion is the variation of market factors, especially demand as products
move within the supply chain. Demand has always risen from the consumer and moves up to the
supplier. Distortion of demand information means that the knowledge that the supplier has about
the market is not the actual representation of the state of demand (Boylan, 2011). This
confusion leads to undersupply or oversupply, which is not a profitable practice.
The bullwhip effect best explains the concept of information distortion. It focuses on
demand at the retailer level whereby a retailer views a single time increase in demand as an
indicator of a future rise in demand and therefore orders more from the wholesaler. The
wholesalers, in the same way, will increase their orders above the retailers' need. In the long run,
a vast demand reaches the producer, which does not match market reality (Zhang & Pi, 2019).
Distortion of information can also result in market shortages amplified downstream from the
supplier as a result of the reverse bullwhip effect, which leads to inventory changes. There is,
therefore, a need for companies to look out for the bullwhip effect in their supply chain through
measures like inventory dynamics optimization.