Final answer:
The bullwhip effect is illustrated by distorted product-demand information that ripples through the supply chain, with each partner experiencing exaggerated changes in demand. This leads to inefficient ordering and inventory practices, as seen markedly during the COVID-19 pandemic disruptions.
Step-by-step explanation:
The bullwhip effect refers to the phenomenon where distorted product-demand information ripples from one partner to the next throughout the supply chain. This distortion typically occurs because of the fluctuations in customer demand becoming exaggerated as they are transmitted up the supply chain, leading to greater variances in orders and inventory levels than would otherwise be needed.
For example, when a retailer experiences a slight increase in demand, they may order more from the wholesaler than needed, anticipating further increases. The wholesaler, seeing this increased order, assumes even greater demand and orders even more from the manufacturer, and so forth, creating larger and larger waves of demand up the supply chain, which can be costly and inefficient.
The desired option that represents the bullwhip effect is: distorted product-demand information ripples from one partner to the next throughout the supply chain. This effect can result in excess inventory, poor customer service, reduced manufacturing capacity, and ultimately, decreased profitability. During the COVID-19 pandemic, such disruptions became highly visible as businesses experienced extended closings, and supply chain issues became more prevalent, which caused product shortages and price escalations.