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Revisiting rescheduling: MRP nervousness and the bullwhip effect

Li, Qinyun and Disney, Stephen 2017. Revisiting rescheduling: MRP nervousness and the bullwhip effect. International Journal of Production Research 55 (7) , pp. 1992-2002. 10.1080/00207543.2016.1261196

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Abstract

We study the material requirement planning (MRP) system nervousness problem from a dynamic, stochastic and economic perspective in a two-echelon supply chain under first order auto-regressive demand. MRP nervousness is an effect where the future order forecasts, given to suppliers so that they may plan production and organize their affairs, exhibits extreme period-to-period variability. We develop a measure of nervousness that weights future forecast errors geometrically over time. Near-term forecast errors are weighted higher than distant forecast errors. Focusing on replenishment policies for high volume items, we investigate two methods of generating order call-offs and two methods of creating order forecasts. For order call-offs, we consider the traditional order-up-to (OUT) policy and the proportional OUT policy (POUT). For order forecasts, we study both minimum mean square error (MMSE) forecasts of the demand process and MMSE forecasts coupled with a procedure that accounts for the known future influence of the POUT policy. We show that when retailers use the POUT policy and account for its predictable future behavior, they can reduce the bullwhip effect, supply chain inventory costs and the manufacturer’s MRP nervousness.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Centre for Advanced Manufacturing Systems At Cardiff (CAMSAC)
Uncontrolled Keywords: Bullwhip Effect, Inventory Management, Material Requirements Planning (MRP), Supply Chain Management, Nervousness
Publisher: Taylor & Francis (Routledge
ISSN: 0020-7543
Date of First Compliant Deposit: 9 November 2016
Date of Acceptance: 8 November 2016
Last Modified: 08 Dec 2017 10:47
URI: http://orca.cf.ac.uk/id/eprint/95954

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