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Over the past 12 months, super toy mart has experienced a demand variance of 10 000 units and has produced an order variance of 12 000 units.

What is the bullwhip measure for Super Toy Mart?
if super toy mart had made a perfect forecast of demand over the past 12 months and had decided to order 1/12 of that annual demand each month, what would its bullwhip measure have been?

1 Answer

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Final answer:

The bullwhip measure for Super Toy Mart is 1.2. If there had been a perfect demand forecast with even monthly ordering, the bullwhip measure would theoretically be 1, signifying no amplification, though this is a theoretical ideal rather than a practical expectation.

Step-by-step explanation:

The bullwhip effect measure is used to quantify the extent of demand variability amplification in the supply chain. It can be calculated by dividing the order variance by the demand variance. In the case of Super Toy Mart, the bullwhip measure can be calculated as follows:

Order Variance / Demand Variance = 12,000 units / 10,000 units = 1.2

Therefore, the bullwhip measure for Super Toy Mart is 1.2.

Now, if Super Toy Mart had made a perfect forecast of demand and decided to order 1/12 of that demand each month, there would be no variance in demand as the orders would exactly match the forecasted demand. Hence, the bullwhip measure would have been:

Order Variance / Demand Variance = 0 units / 0 units =

Undefined

(or practically, the bullwhip measure would be 1, since there's no amplification if perfect forecasting is assumed)

However, it's not possible to achieve a zero variance in a practical scenario, implying a bullwhip measure of exactly 1 is theoretical and serves to show how perfect forecasting would eliminate variability between orders and demand.

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