Effects of Consumer Demand
A high consumer demand for a product means that there is a sure market for the particular product. This is the main reason why companies invest heavily in advertising and marketing to ensure that their products are in demand. There are various strategies that companies apply to ensure their products are in demand. However, consumer demand may have some effects on those who supply the products.
A major effect of consumer demand on suppliers is the Bullwhip effect which is a result of demand fluctuations. There are times when demand keeps shifting from high to low and it is these fluctuations that are referred to as the bullwhip effect. The bullwhip effect is first felt in the supply chain and can adversely affect the flow of products from the suppliers to the consumers (Hugos, 2011, p. 56). The lack of consistency in the number of orders to the suppliers causes planning problems in supply chain management. This shows that very minor changes can cause major variations in the whole supply chain.
Pressure is mounted on the suppliers when demand is higher than the supply; and if not well managed, a backlog of unsettled orders may result. This in the long run may make supply chain management difficult and result in dissatisfaction in consumers. Another effect is that high consumer demand may force suppliers to increase the prices of their materials and products (Hugos, 2011, p. 103). Demand and prices rise and decline in direct proportion and so, suppliers have to work to ensure that what they give to their clients meets customer expectations. This is a sure way of ensuring constant demand of the particular product. Other minor effects on the suppliers are triggered by demand factors such as income increment. A high income increases the purchasing power of a consumer. In conclusion, a slight change in either demand or supply affects the whole market equilibrium.
References
Hugos, M. (2011). Essentials of Supply Chain Management. New Jersey: Wiley.
