The
demand variability causes
the variation in the use
of production, material,
and distribution capacity.
A typical response to this
problem is to design capacity
for peak demand and bear the
cost of underused capacity
during periods of average
demand.
Considerable research in this
area provides limited suggestions
for reducing the bullwhip effect:
reducing uncertainty, reducing
variability of the downstream
demand process, reducing lead
times, and engaging in strategic
partnerships (Simchi-Levi &
Kaminsky, 2003).