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On bullwhip in a family of order-up-to policies with ARMA(2,2) demand and arbitrary lead-times

Gaalman, Gerard and Disney, Stephen Michael 2009. On bullwhip in a family of order-up-to policies with ARMA(2,2) demand and arbitrary lead-times. International Journal of Production Economics 121 (2) , pp. 454-463. 10.1016/j.ijpe.2006.11.024

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A number of papers have recently appeared that investigate the “bullwhip effect” (the variance amplification of ordering decisions in the supply chain) produced by the order-up-to replenishment policy. An adapted policy, with a proportional inventory position feedback controller, has shown improved “bullwhip” behaviour. The dynamic behaviour of this so-called “proportional order-up-to” policy has been investigated for arbitrary lead-times and several demand models such as i.i.d. demand and autoregressive moving average AR(1) and ARMA(1,1) models. It has been shown that, for a correct choice of the feedback parameter, the bullwhip effect can always be avoided. However, less attractive properties of this policy have also become clear. Herein, we investigate the behaviour of the proportional order up to policy for ARMA(2,2) demand with arbitrary lead-times. In order to compensate for possible weaknesses of the proportional OUT policy we propose another replenishment rule that accounts for the characteristics of the demand in a superior manner. The characteristics of both policies are compared for several parameter settings of the ARMA(2,2) model. Finally, the consequences of our full-state-feedback order-up-to policy are discussed.

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
H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Uncontrolled Keywords: Bullwhip effect ; ARMA(2, 2) demand ; Proportional order-up-to policy ; Full-state-feedback order-up-to policy
Publisher: Elsevier
ISSN: 0925-5273
Date of First Compliant Deposit: 30 March 2016
Last Modified: 10 Mar 2020 17:18

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