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The order is placed to fulfill the current demand and also keeping in mind any unpredictable sale, which is the safety stock. The manager next in the supply chain orders from his suppliers based on the same fundamentals and with every level the order varies exponentially, resulting in the bullwhip effect. Because the amount of safety stock contributes to this effect it is consequential that when the lead times between the resupply of the inventory along the supply chain is longer the fluctuation in the demand is higher.
Order batching
Companies order from their suppliers usually either at regular intervals or on an on demand basis which is periodic or push ordering...
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