When a firm places orders in lot sizes that are much larger than the lot sizes in which demand arises,
A)variability of orders is minimized up the supply chain.
B)variability of orders is magnified up the supply chain.
C)suppliers gain better visibility of consumer demand.
D)suppliers gain a more stable demand pattern.

Question

Quizplus · Accepted Answer

When a firm places orders in lot sizes that are much larger than the lot sizes in which demand arises, the variability of orders is magnified up the supply chain. This is because the demand patterns are amplified as they move up the supply chain, causing suppliers to experience larger fluctuations in demand than they would if orders were more closely aligned with actual demand.

When a Firm Places Orders in Lot Sizes That Are