How can the bullwhip effect impact a company’s operations and its marketing functions
Answer:
Bullwhip effect explains how the variations at the retail level can result in greater fluctuations at a higher level such as distribution, wholesaler, retailers, and suppliers
Factors that cause such effect are:
1. Overbatching
2. Disorganization
3. Price fluctuations
4. Shortages
Impact on company's operations and its marketing functions:
1. Wastage: There may be cases of stockouts when buyers overcompensate due to undersupply market demand. Because of which excess inventory will be stored leading to wastage when the demand falls down.
2. Affecting relations with suppliers. Fluctuating demands can put pressure on the suppliers to provide more materials on time or buy back returned goods which may not be good for the relationship with the suppliers.
3. Stockouts: It is pshycological response to reduce the level of inventory when the demand falls and in future when the demand rises again there will a situation of stock out. damaging the image of the company.
4. Infrequent orders: Bullwhip effect occurs when the buyer orders infrequently to avoid such a situation smaller orders must be made to get fresh goods and avoid stock-outs.
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