The “bullwhip” effect:
A. Occurs as orders are relayed from retailers to wholesalers
B. Results in increasing fluctuations at each step of the sequence
C. Increases the costs associated with inventory in the supply chain
D. Occurs because of distortions in information in the supply chain
What do you think?
We don't DO homework, but we HELP those students who make an effort to help themselves.
The correct answer is D. The "bullwhip" effect occurs because of distortions in information in the supply chain.
To understand why this is the correct answer, let's break down the options and explain each one:
A. Occurs as orders are relayed from retailers to wholesalers: This option is not entirely correct. While it is true that the "bullwhip" effect can be observed as orders are relayed from retailers to wholesalers, it is not limited to this part of the supply chain. The effect can be seen across different stages of the supply chain, including manufacturers, distributors, and even raw material suppliers.
B. Results in increasing fluctuations at each step of the sequence: This option is partially correct. The "bullwhip" effect does cause increased fluctuations, but it is important to note that these fluctuations occur not at each step of the sequence, but as you move up the supply chain. In other words, the fluctuations become more pronounced as you move from retailers to wholesalers, then to manufacturers, and so on.
C. Increases the costs associated with inventory in the supply chain: This option is also correct. When the "bullwhip" effect occurs, it leads to increased variability in demand forecasts and orders. As a result, companies tend to overestimate or underestimate the actual demand, which leads to the need for greater safety stock, increased inventory carrying costs, and potentially increased stockouts or excess inventory.
D. Occurs because of distortions in information in the supply chain: This option is the correct answer. The "bullwhip" effect is primarily caused by distortions in information flowing through the supply chain. As information moves from one entity to another, it gets filtered, delayed, and distorted, leading to a lack of visibility and accurate demand forecasting. This, in turn, causes the demand data to be amplified and distorted as it moves up the supply chain.
By understanding the correct answer and the explanations, you can see that the "bullwhip" effect is a phenomenon caused by information distortions in the supply chain, resulting in increased fluctuations and costs associated with inventory.