This endogenous volatility is carried upstream through correlation
so that supply should closely match demand. However, exogenous disruptions or
volatility that break the correlation between supply and demand at any level of
the supply chain will cause a condition where the previous low inventory levels
are no longer sufficient since the high correlation they were based on has been
drastically reduced. These situations are much better handled through supply
chain risk management and other initiatives that will work either to increase
production and inventory to accommodate the new uncorrelated situation or to
bring supply and demand back into correlation given the new status quo.