Question

In supply chain, the bullwhip effect produces progressively larger inventories as demand variation increases upstream. A primary reason for this supply behavior is: Select one: a. Suppliers announce price reduction. b. Supply shortages stimulate small lot size production. c. Perceived shortage causes buyers to inflate orders. d. Suppliers increa

Answer 1

c. Perceived shortage causes buyers to inflate orders.

Step-by-step explanation:

The bullwhip effect phenomenon is when the demand forecasts of buyers of a product results in supply inefficiencies.

Demand and supply are related in that an increase in supply results in lower prices of goods and demand rises, and vice versa.

In the bullwhip phenomenon available inventory of a product varies on the basis of demand.

For example an increase in perceived demand for a product will result in an increase in inventory from the supplier and price goes down.

On the other hand when there is a perceived shortage of a product buyers will tend to inflate orders and price will eventually rise