Question
Which among the toHowing options is a re ason for the bullwhip effect? (2 marks for the questions and thereo fter, until shown otherwise) Demand forecasting Strategic partnership Lead time reduction Misguided capacity planning
Answer
4
(263 Votes)
Jemima
Elite · Tutor for 8 years
Answer
A
Explanation
The bullwhip effect in the business supply chain refers to a phenomenon where order variances amplify as orders move up the supply chain, away from the consumer. This question aims to identify which factors among the provided options can contribute to this phenomenon. Option A, 'Demand forecasting', can cause the bullwhip effect mostly due to inaccuracies in forecasting customer demand causing an overreaction in planning which subsequently results in excess inventory. Option B, 'Strategic partnership', typically results in a close collaborative relationship between businesses and is unlikely to cause the bullwhip effect. Option C, 'Lead time reduction', generally influences the bullwhip effect as shorter lead times can possibly reduce the effect by reducing the amount of time an inaccurate prediction can affect the supply chain. However, it is generally considered as a solution and not a cause.Option D, 'Misguided capacity planning', could contribute to the bullwhip effect. Incorrect planning regarding production capability can result in larger discrepancies between supply and demand. However, this factor had less weight in literature compared to demand forecasting issue.From these analyses, out of all these options the one which is most indirectly associated with the cause of bullwhip effect is 'Demand forecasting'