Which of the following BEST describes what is occurring in this situation?

XYZ, Inc. is a manufacturer and distributor of fishing gear. XYZ relies on poorly-executed forecasts from its retail partners, which leads to exaggerated demand. This in turn leads to XYZ experiencing increased inventory, material handling concerns, and difficulties managing its accounts payable.

Which of the following BEST describes what is occurring in this situation?
A . Bullwhip effect
B . Speculative buying
C . Adaptive smoothing
D . Backflush

View Answer

Answer: A

Explanation:

The situation describes the bullwhip effect, where poor forecasting by retail partners leads to exaggerated demand signals, causing inefficiencies like excess inventory and handling challenges. This effect is common in supply chains with inadequate communication and coordination.

Reference: Supply chain management literature extensively discusses the bullwhip effect as a critical issue in demand forecasting and inventory management.