Which practice is a recommended mitigation for the bullwhip effect?

Which practice is a recommended mitigation for the bullwhip effect?

• A. Sharing point-of-sale data and reducing order batch sizes.
• B. Increasing order batch sizes and hiding demand signals.
• C. Reducing communication with suppliers.
• D. Relying solely on annual forecasts.

Answer: (C)

Mitigating the bullwhip effect hinges on improving visibility and coordination of demand across the supply chain. Sharing point-of-sale data gives upstream partners accurate, real-time demand signals, reducing guesswork and forecast error. Coupled with smaller, more frequent order quantities, this prevents large swings in orders from propagating upstream. As a result, production planning becomes more stable and inventories align better with actual demand. Increasing order batch sizes tends to amplify fluctuations because large, infrequent orders create big swings in supplier production and inventory. Withholding demand signals deprives the supply chain of critical information, making forecasting harder and more error-prone. Relying only on annual forecasts ignores shorter-term demand dynamics, promotions, and seasonality, leading to larger inaccuracies and a greater bullwhip effect.

Mitigating the bullwhip effect hinges on improving visibility and coordination of demand across the supply chain. Sharing point-of-sale data gives upstream partners accurate, real-time demand signals, reducing guesswork and forecast error. Coupled with smaller, more frequent order quantities, this prevents large swings in orders from propagating upstream. As a result, production planning becomes more stable and inventories align better with actual demand.

Increasing order batch sizes tends to amplify fluctuations because large, infrequent orders create big swings in supplier production and inventory. Withholding demand signals deprives the supply chain of critical information, making forecasting harder and more error-prone. Relying only on annual forecasts ignores shorter-term demand dynamics, promotions, and seasonality, leading to larger inaccuracies and a greater bullwhip effect.