Question

A restaurant runs a special promotion on lobster and plans to sell twice as many lobsters as usual. When this large order is sent to the distributor, the distributor assumes the large size is a trend, not a one-time event. The distributor therefore places an even larger order with the lobsterman. This behavior is the result of which of the following?A) double marginalizationB) the bullwhip effectC) CPFRD) postponementE) vendor-managed inventory

Answer 1

The correct answer is B) the bullwhip effect.

Step-by-step explanation:

The bullwhip effect is a phenomenon observed in distribution channels. It refers to a trend of larger and larger changes in inventory in response to changes in customer demand, when one looks at companies at the back of the supply chain for a product. The concept first appeared in Jay Forrester Industrial Dynamics (1961) and is therefore also known as the Forrester effect Since the magnification of the oscillating demand uphill of a supply chain is reminiscent of the cracks of a whip, it was known as the effect bullwhip.