What is the impact of order batching in supply chain management?

Order batching in supply chain management refers to the practice of consolidating orders into larger, less frequent shipments rather than processing smaller, more frequent orders. This approach can lead to fluctuations in the perceived demand for products, particularly when orders are batched and delivered at irregular intervals.

The correct impact of order batching is that it amplifies demand variability. When orders are placed in larger batches, it creates a situation where the supply chain sees sudden spikes in demand followed by lulls. This inconsistency can lead to a phenomenon known as the bullwhip effect, where small changes in customer demand at the retail level can cause significant variations in demand further up the supply chain, such as wholesale distributors and manufacturers. As businesses react to these perceived demand changes, inventory levels can become erratic, causing inefficiencies in production and stock management.

Other options describe different impacts on the supply chain. For instance, reducing demand variability or eliminating safety stock might imply a smoother flow of goods and more predictable inventory needs, but those are not typical outcomes of order batching. Instead, the practice tends to complicate inventory management due to the increased variability it introduces. Streamlining inventory flow is another desirable outcome, but order batching can actually disrupt the flow by introducing delays and variances in inventory