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The impact of stochastic lead times on the bullwhip effect under correlated demand and moving average forecasts

Michna, Zbigniew, Disney, Stephen and Nielson, Peter 2019. The impact of stochastic lead times on the bullwhip effect under correlated demand and moving average forecasts. Omega 10.1016/j.omega.2019.02.002
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Abstract

We quantify the bullwhip effect (which measures how the variance of replenishment orders is amplified as the orders move up the supply chain) when both random demands and random lead times are estimated using the industrially popular moving average forecasting method. We assume that the lead times constitute a sequence of independent identically distributed random variables and the correlated demands are described by a first-order autoregressive process. We obtain an expression that reveals the impact of demand and lead time forecasting on the bullwhip effect. We draw a number of conclusions on the bullwhip behaviour with respect to the demand auto-correlation and the number of past lead times and demands used in the forecasts. We find maxima and minima in the bullwhip measure as a function of the demand auto-correlation.

Item Type: Article
Date Type: Published Online
Status: In Press
Schools: Business (Including Economics)
Publisher: Elsevier
ISSN: 0305-0483
Date of First Compliant Deposit: 4 February 2019
Date of Acceptance: 4 February 2019
Last Modified: 29 Jun 2019 15:38
URI: http://orca.cf.ac.uk/id/eprint/119183

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