Reactive destocking

In general, active destocking is done following an autonomous, often financial decision by a company to improve its efficiency, freeing up cash and reducing its costs.

The Lehman Wave can have strong effects on the sales volume and therefore on the profitability of companies higher in the value chain.

Said bankruptcy created a sudden peak in the Libor interest rate, causing the banks to recall credit and companies to start freeing up cash by active destocking, so reducing their stocks.

Active and reactive destocking explains why some companies can see a strong dip in sales while their end markets are fairly stable.

Fransoo and Wouters (2000)[11] and Chen and Lee (2009)[12] argue that in order to observe the bullwhip effect it is crucial to measure it correctly.

Both these papers argue that improper aggregation essentially takes away the opportunity to observe the bullwhip effect.

A reduction of inventories under stable or slightly decreasing sales can only be achieved if purchases are reduced or postponed.