4. (e points) In a supply chain the demand of the end-consumer is 100. The retai

Question

4. (e points) In a supply chain the demand of the end-consumer is 100. The retailer assumes that his forecast for the end-consumer demand will have an error of 10%, thus he places an order which will cover for the potential error of 10P%. The wholesaler ard the manufacturer assume to make their forecast of the retailer's order with an error of 20% and so%, respectively, thus they will procure an amount of product which will cover for the potential errors. Please refer to Figure 1 for more details. What is the total demand error (defined by the sum of demand errors by retailer, wholesaler and manufacturer), expressed as a percentage of the end-consumer demand? 132 143 100110 Retailer Wholesaler Manufacturer End-Consumer +10% +20% +30% Figure 1: Errors of demand forecast in the Supply Chain

Explanation / Answer

This can be calculated as under-

10+20+(10*20)/100=32

32+30+(30*32)/100= 69

Total error is 69%

To note, the figure shown above shows that Manufacturer and Wholeseller demands are independent hence the Error % for whole seller woud be 32% and Manufacturer would be 43%.. But as per the question, manufacturer and whole seller are dependent hence the error would be 69%.

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