Correct Answer: C
The bullwhip effect refers to the phenomenon where small fluctuations in demand at the consumer level cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer, and raw material supplier levels. One effective method to minimize the bullwhip effect is reducing lead time. Shorter lead times allow for more frequent and smaller replenishment orders, which align more closely with actual demand patterns and reduce the impact of demand variability. This helps in smoothing out the supply chain and reducing excess inventory and stockouts. Outsourcing noncore activities, reducing SKUs, and increasing factory inventory do not directly address the issue of demand amplification like reducing lead times does.
References:
* Lee, H. L., Padmanabhan, V., & Whang, S. (1997). The Bullwhip Effect in Supply Chains. MIT Sloan Management Review.
* Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2008). Designing and Managing the Supply Chain:
Concepts, Strategies, and Case Studies. McGraw-Hill.