Answer to Question 1
One problem with basing production on supply chain partners' forecasts is the potential for the bullwhip effect to occur. Under this phenomenon, forecast errors are magnified and demand variability increases as orders move upstream from retailers to distributors to producers. The producers have to complete larger and more variable production batches to supply the often-changing downstream orders. This can lead to inefficient resource utilization as production capacity is not consistently engagedsometimes being overworked, other times being idled.
Answer to Question 2
First, inexpensive items often bought on impulse need to be widely available to stimulate sales. Customers aren't willing to drive very far for a candy bar, so if they're going to buy one, it has to be where they are, not somewhere else. Furthermore, since such things are inexpensive, companies need to sell them in large volume, meaning they need to be highly available. This is easy to do since these types of goods are usually smallmanufacturers can box up a whole bunch of them in a small space to transport them all over the place. This also works because of how simple these goods are. There is no need for a salesperson to be an expert able to discuss the item with a customer to help them purchase.
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