The example of the bullwhip effect shown in Table 13.4 shows how a simple 5 per cent reduction in demand at the end of supply chain causes fluctuations that increase in severity the further back an operation is placed in the chain.
(a) Using the same logic and the same rules (i.e. all operations keep one period’s inventory), what would the effect on the chain be if demand fluctuated period by period between 100 and 95? That is, period 1 has a demand of 100, period 2 has a demand of 95, period 3 a demand of 100, period 4 a demand of 95, and so on?
(b) What happens if all operations in the supply chain decide to keep only half of the period’s demand as inventory?

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Table 13.4 Fluctuations of production levels along supply chain in response to a small change in end customer demand Period 2 3 4 5 6 Third-tier supplier Prodn Stock 100 100 100 20 180 3 60 100 95 100 60 60 120 120 90 90 95 95 95 Orders 2 Second-tier supplier Prodn 100 60 120 90 95 95 Orders Stock 100 100 Items Items (Note: all operations keep one period's inventory) 100 80 80 100 100 95 95 95 95 95 1 Prodn Stock 100 100 100 First-tier supplier 80 100 95 95 95 Orders Items OEM 100 90 90 95 95 95 95 95 95 95 Orders Items Original equipment mfr Stock Prodn 100 90 95 95 95 95 100 100 100 95 95 95 95 95 95 95 95 95 Market Demand 95 95 95