The "bullwhip" effect occurs when forecast errors are magnified and demand variability increases as orders move upstream from retailers to distributors to producers.

Question

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This statement accurately describes the bullwhip effect, which is a common phenomenon in supply chain management. As demand signals move upstream from retailers to wholesalers to manufacturers, small fluctuations can be amplified into significant swings in inventory levels and procurement decisions. This can lead to inefficiencies, excess inventory, and stockouts.

The "Bullwhip" Effect Occurs When Forecast Errors Are Magnified and Demand