Suppose That in Month 1, Both the Retailer and the Wholesaler

question 27

Multiple Choice

Suppose that in month 1, both the retailer and the wholesaler in a supply chain ordered 20,000 units. Then in month 2, the retailer decreases its order size by 1000 units. If the wholesaler then decreases its order size in month 2 by 700 units, which of the following is true?

• A) The wholesaler is contributing to the bullwhip effect.
• B) The wholesaler is providing a dampening (anti-bullwhip) effect.
• C) The bullwhip measure for the wholesaler equals 0.70.
• D) Neither amplification nor smoothing is present.
• E) The wholesaler is providing both amplification and smoothing.

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Definitions:

Holding Cost

The expenses associated with storing unsold goods or materials, including warehousing, insurance, and opportunity costs.

Fixed-Period Inventory System

An inventory control system where stock levels are checked at fixed intervals and orders are placed as needed to replenish supplies.

Fixed Quantity Inventory System

Inventory management strategy where a predefined quantity of product is ordered when stock falls to a certain level.

Stockout

A situation where the demand for a product exceeds its supply in inventory, resulting in an inability to meet customer demand.