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A win-win solution for the bullwhip problem

Boute, Robert N., Disney, Stephen Michael, Lambrecht, Marc R. and Van Houdt, Benny 2008. A win-win solution for the bullwhip problem. Production Planning & Control 19 (7) , pp. 702-711. 10.1080/09537280802573767

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An important supply chain research problem is the bullwhip effect where demand variability increases as one moves up the supply chain. This distorted information may lead to inefficiencies. In this article we suggest a remedy to reduce the bullwhip effect. We focus on an inventory replenishment rule that reduces the variability of upstream orders and generates a smooth order pattern. However, dampening the order variability has a negative impact on customer service due to an increased inventory variance. We resolve this conflicting issue by taking the impact of the replenishment rule on lead times into account. A smooth order pattern generates shorter and less variable (production/replenishment) lead times, introducing a compensating effect on the inventory levels. We show that by including endogenous lead times in our analysis, the order pattern can be smoothed to a considerable extent without increasing stock levels, resulting in a win–win solution for both supply chain echelons. Finally we discuss several order smoothing approaches from an industrial perspective and comment on how our results may influence these cases.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Centre for Advanced Manufacturing Systems At Cardiff (CAMSAC)
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
Uncontrolled Keywords: supply chain control; supply chain collaboration; bullwhip effect
Publisher: Taylor and Francis
ISSN: 0953-7287
Last Modified: 03 Mar 2020 02:26

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