Reference no: EM133775281

Question 

In the late 1970's and early 1980's the technological and market development in the computer industry was growing very rapidly. Not only were more companies purchasing and using larger computers, but the people around the world were creating a large demand for personal computers. The result was a much accelerated growth in demand for the integrated circuits (chips) used to make the computers. The normal lead time quoted by most of the producers of chips was about six weeks. Once they realized the large increase in orders, however, they naturally thought "If we have a lot more orders then it may take longer for us to satisfy them all-we had better quote eight weeks instead of six." As soon as they did that then the customers naturally thought "If it takes us longer to get orders, we had better put in more orders to cover us for at least eight weeks and not just six." This generated lots of new orders, prompting the chip producers to once again be concerned and extend the quoted lead time yet again, which again generated more orders as the chip customers grew concerned about the supply. This back-and-forth activity continued until at one point.