What are the causes of the Houlihan effect in logistics?

The Houlihan effect refers to the phenomenon in logistics where demand variability increases as one moves up the supply chain. There are several causes that contribute to this effect. First, there is the issue of demand forecasting inaccuracies, where downstream organizations may not accurately predict future demand for products, leading to fluctuations in orders placed upstream. Second, supply chain delays, disruptions, and bottlenecks can amplify the Houlihan effect. For example, if there are delays in transportation or manufacturing, it can lead to spikes and drops in demand as organizations attempt to compensate for the delays. Furthermore, miscommunication and lack of collaboration between supply chain partners can exacerbate the effect, as each organization may make decisions based on limited information, leading to further demand variability. Lastly, the bullwhip effect, where small changes in demand get magnified as they propagate upstream, can also contribute to the Houlihan effect. Overall, a combination of these factors contributes to the increasing demand variability observed in logistics.

This mind map was published on 15 November 2023 and has been viewed 89 times.