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Write the following in different words: An example of the the bullwhip effect: Imagine a retail store that sells umbrellas. During a normal week, the
Write the following in different words: An example of the the bullwhip effect: Imagine a retail store that sells umbrellas. During a normal week, the store sells an average of 100 umbrellas. But, during a rainy week, the demand for umbrellas suddenly increases to 300. The store then places an order with its supplier for 300 umbrellas to meet the new demand. However, the supplier may not know whether the increased demand is a temporary spike or a sustained trend. To be safe, the supplier may order 500 umbrellas from its manufacturer, anticipating future orders from the retailer. The manufacturer, in turn, may not know the reason for the sudden increase in demand and may order 1,000 umbrellas from its raw material supplier to ensure it has enough materials to meet demand. This results in an amplified effect up the supply chain, where small changes in demand at the retail store level lead to a significantly larger change in the amount of umbrellas ordered by the manufacturer, leading to excess inventory and increased costs
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