Operational improvements that reduce lot sizes can dampen the bullwhip effect by
A) decreasing the uncertainty of demand during the lead time.
B) decreasing the amount of fluctuation that can accumulate between any pair of stages of a supply chain.
C) discouraging retailers from artificially inflating their orders in the case of a shortage.
D) allocating the available supply based on past retailer sales.
E) none of the above

Question

Quizplus · Accepted Answer

The bullwhip effect is caused by the accumulation of small changes in demand variability as orders move upstream in the supply chain. By reducing lot sizes, the amount of fluctuation that can accumulate between any pair of stages in the supply chain is decreased, which dampens the bullwhip effect. This occurs because smaller lot sizes reduce the effect of demand variability by smoothing out the peaks and troughs in demand, making it easier to predict demand accurately.

Operational Improvements That Reduce Lot Sizes Can Dampen the Bullwhip