Tying allocation to past sales removes any incentive a retailer may have to inflate orders,as a result dampening the bullwhip effect.

Question

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Tying allocation to past sales creates a more accurate forecast, reducing the likelihood of over-ordering or under-ordering, thus reducing the bullwhip effect. It also removes the incentive for a retailer to inflate orders to receive more allocation in the future.

Tying Allocation to Past Sales Removes Any Incentive a Retailer