QUESTION: 81

Which of the following methods is used to minimize the bullwhip effect?

Outsourcing noncore business activities
Reducing the number of stock keeping units (SKUs)
Reducing lead time
Increasing factory inventory

Answer(s): C

Explanation:

Demand-driven material requirements planning (DDMRP) is a relatively new type of ordering system that can be used for dependent and independent demand items at any point in the supply chain. DDMRP strategically positions inventory to achieve all the benefits of modern supply chain management (reduce inventory, lead times to the customer, and the bullwhip effect and increase customer service and asset usage efficiency) without needing to rely on safety stocks of finished goods or a pure make-to-order environment. Instead, DDMRP determines how to shrink total lead times by creating buffer inventories of key components that have longer lead times than other components making up a finished good.

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