* Context: Shipping directly from the point of manufacture to the customer eliminates the intermediate distribution network.
* Options Breakdown:
* A. Delivery lead times are consistent: Not necessarily true, as direct shipping can have variable lead times.
* B. Risk pooling benefits are negated: Distribution centers pool inventory to reduce variability in demand and supply; direct shipping bypasses this advantage.
* C. Distribution overhead is increased: Actually, distribution overhead is typically reduced with direct shipping.
* D. Order-fill rate is decreased: Not necessarily true, as it depends on the efficiency of the direct shipping process.
* Correct Answer Justification: Risk pooling helps manage demand variability and inventory levels more effectively; direct shipping bypasses distribution centers, thus negating these benefits.
:
Supply chain management textbooks and articles
Research on direct shipping vs. distribution center logistics

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.
:
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.

Section: Mixed questions