Question

The bullwhip effect:

A. Occurs because of distortions in information in the supply chain

B. Occurs as orders are relayed from retailers to distribution to wholesalers to manufactures

C. Increases the costs associated with inventory in the supply chain

D. Results in increasing fluctuations at each step of the sequence

E. All the above are tru

Answer 1

ANS: E. All the above are true

If variations in customer demand are not adequately recognized or passed on with some distortions in the upstream process, it results in over stocking or stock out situations. This phenomenon is known as the Bullwhip effect. It refers to the distortion or deformation of information, when it moves from the market to the vendors through to the organization’s distribution network, and to its manufacturing and procurement department upstream in the supply chain. Demand unpredictability has a cascading effect on the supply chain which causes inventory problems. This ultimately affects the profitability of the organization or the service which is offered to the customers.