Final answer:
The bullwhip effect in supply chain management can be caused by demand fluctuations, but can be mitigated by using frequent and smaller order sizes, implementing Vendor-managed inventory (VMI), and making actual demand data available to suppliers.
Step-by-step explanation:
The bullwhip effect is a phenomenon that occurs in supply chain management where small fluctuations in demand can cause a ripple effect, resulting in larger fluctuations in upstream supply chain activities. The bullwhip effect can be caused by several factors, including demand fluctuations, which are represented by option c. When the demand for a product varies significantly, it can lead to excessive inventory and production adjustments, causing the bullwhip effect. Inaccurate demand forecasting and communication gaps between supply chain partners can also contribute to this effect.
Using frequent and smaller order sizes, represented by option a, can actually help reduce the bullwhip effect. By ordering smaller quantities more frequently, companies can better match supply with demand, minimizing the need for large adjustments in inventory levels and production.
Implementing Vendor-managed inventory (VMI), represented by option b, can also help alleviate the bullwhip effect. VMI involves the supplier taking responsibility for inventory management at the retailer's location. This allows for real-time demand visibility and facilitates better coordination between the supplier and retailer, reducing the potential for demand distortion.
Making actual demand data available to suppliers, represented by option d, can also help mitigate the bullwhip effect. When suppliers have access to accurate and timely demand information, they can adjust their production and inventory levels accordingly, reducing the risk of over- or under-production.