Information processing obstacles occur when demand information becomes distorted as it passes from one stage of the supply chain to another. Each organization may receive only the orders of its immediate customer rather than having direct visibility into actual consumer demand. If those orders contain batching, safety-stock adjustments, promotional purchases, or forecast corrections, the upstream organization can incorrectly interpret the variation as a true change in market demand.

The organization then revises its own forecast and purchasing or production requirements, creating an even larger upstream response. Repetition of this process across multiple stages produces increased order variability and contributes directly to the bullwhip effect.

Two critical sources are forecasting from orders rather than actual consumption and insufficient information sharing. Appropriate remedies include point-of-sale data sharing, integrated information systems, collaborative forecasting, shared inventory visibility, and single-stage control of replenishment where suitable.

Information-processing obstacles differ from operational obstacles, which involve ordering practices and lead times; pricing obstacles, which involve discounts and promotions; and behavioral obstacles, which concern organizational learning and trust.

The standard coordination framework defines this category specifically as distortion of demand information as it moves across supply-chain stages.

Reference Topic: Technology, Analytics and Digital Transformation — Information Visibility, Demand Signals, and Coordination.

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