The example of the bullwhip effect shown in Table 7.2 shows how a simple 5 per cent reduction in demand at the end of the 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 demand as 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 of 100, period 4 of 95, and so on?

(b) What happens if all operations in the supply chain decide to keep only half of each period’s demand as inventory?

(c) Find examples of how supply chains try to reduce this bullwhip effect.