Question

La Belle Inc. introduced a new line of accessories for teenage girls last season. Following its immense popularity with the targeted group, the company anticipated high sales in the current season and ordered raw materials accordingly. However, the success of the new line turned out to be a fad as the teens soon turned to other products offered by competing brands and La Belle's sales declined. This forecasting error caused a huge discrepancy in the amount of raw materials they needed and the amount of inventory they had already piled up in anticipation of good sales. This is an example of ________. the multiplier effect safety stock planning hindsight bias product recall the bullwhip effect

Answer 1

The Bullwhip effect

Step-by-step explanation:

This is an example of bullwhip effect.

The Bullwhip supply chain effect has to do with firms having to procure more, to keep pace with fluctuations in consumer demand as a result of forecast inaccuracies.

The Bullwhip starts from the retailer who has direct interface with the consumer and first receives the shock of the change in demand and passes it on to the wholesaler and then to the manufacturer and finally, raw material supplier.

It is indicated in the scenario that ''This forecasting error caused a huge discrepancy in the amount of raw materials they needed and the amount of inventory they had already piled up in anticipation of good sales.''

Hence consumer demand was not adequately anticipated and that is an example of the bullwhip effect.

Answer 2

The bullwhip effect

Step-by-step explanation:

The bullwhip effect is identified by the supply chain, specifically where a great difference exists between the sales to the end-user and the orders sent to the supplier or manufacturer. This irregularity affects the supply chain process because it would lead to exaggerated fluctuations.

Certain factors are responsible for the bullwhip effect or are contributors, some of them are:

1. When qualitative communication does not exist between links in the supply chain. This results in ordering different quantities because each link in the supply chain is working individually on perceived product demand.
2. Categorizing orders in different batches. This occurs when companies tend to accumulate demand before placing an order. This could affect the supply chain negatively due to inconsistencies in demand.
3. Using obsolete demand information. When the previous demand information is used without considering demand fluctuations over a period of time contributes greatly to the bullwhip effect.