Ravi has opened a dairy shop in Jaipur. He planned to buy cottage cheese from a wholesaler and sell it to customers. The current cottage cheese prices are floating at 300 per kilogram. To gain the attention of his customers and capture a big market share, Ravi decided to sell the cheese at 250 per kilogram for the first month. At this price, he was making neither a profit nor a loss. As a result, his shop became extremely popular in Jaipur. On average, he was selling 200 kilograms of cottage cheese every day. Taking this as a positive sign, he got into a contractual agreement with his wholesaler to provide him with 200 kilograms of cottage cheese every day. After the first month, Ravi had captured a significant market share. Then, to stabilise the prices, he started selling the cheese at 300 per kilogram. This resulted in a huge loss of sales, and his average daily sales fell to only 20 kilograms. He did not know what to do with the excess supply of 180 kilograms (200-20) of cottage cheese. 

Determine what caused the bullwhip effect in the aforementioned scenario.

 

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The bullwhip effect in supply chain management refers to the phenomenon where small fluctuations in ... View the full answer