Causes of Bullwhip Effect

RealU has developed a huge market in India by selling smartphones with higher specifications at very low prices. It usually sells new smartphones through online flash sales, where the product is available in a limited quantity. The online retailer takes the sales figures after every flash sale and provides them to RealU, which then plans the next flash sale accordingly. In a flash sale, it is extremely difficult to place an order. In order to overcome this difficulty, people usually ask their friends to add the smartphone to their online cart and proceed with the payments as soon as the product is made available for sale. In such a case, if out of five friends, three are successful in ordering the product, then two of them have to return the smartphone as soon as it arrives at their doorstep. The online retailer does not charge its customers a fee when they are returning a product. As a result, the initial sales numbers go down. This results in a bumped-up demand for RealU, whereas the ground reality is slightly different. This translates to the bullwhip effect.

Determine what caused the bullwhip effect in the aforementioned scenario.

A) Price fluctuations

B) Lack of communication

c) Free return policy

d) Order Batching

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In the scenario described the bullwhip effect is primari... View the full answer