What is a common challenge associated with demand variability?

Demand variability refers to the fluctuations in customer demand for products or services over time, which can often lead to significant challenges within supply chain management. A common challenge related to this variability is the occurrence of excess inventory or stockouts.

When demand is inconsistent, it becomes difficult for firms to accurately gauge how much inventory to maintain. If the demand suddenly increases and the organization is underprepared, it can lead to stockouts, where customers find that desired products are not available. Conversely, if the demand decreases unexpectedly, it can result in excess inventory, leading to increased holding costs and potential waste, especially if products are perishable or have a limited shelf life. Thus, managing inventory levels in the face of demand variability is a critical aspect of strategic supply chain management, making it essential for organizations to develop flexible and responsive inventory strategies.

This answer illustrates the inherent challenges posed by demand variability, emphasizing the balance organizations must strike to ensure they meet customer expectations while controlling costs associated with inventory management.