In a supply chain where each stage of the supply chain independently makes its pricing decisions with the objective of maximizing its own profit,
A)supply chain profit is lower than a coordinated solution.
B)supply chain profit is higher than a coordinated solution.
C)supply chain profit is about the same as a coordinated solution.
D)supply chain profit will be maximized.

Question

Quizplus · Accepted Answer

When each stage independently makes pricing decisions to maximize its own profit, it may lead to a situation known as the "bullwhip effect." The bullwhip effect is a phenomenon where small fluctuations in consumer demand can lead to large fluctuations in the upstream supply chain, resulting in inefficiencies such as overproduction or underutilized capacity, leading to higher material and inventory holding costs. In this case, the supply chain profit will be lower than a coordinated solution where all stages work together to optimize the overall profit.

In a Supply Chain Where Each Stage of the Supply