Measuring the Bullwhip Effect: Discrepancy and Alignment Between Information and Material Flows (original) (raw)

Information Distortion in a Supply Chain: The Bullwhip Effect

Management Science, 1997

Consider a series of companies in a supply chain, each of whom orders from its immediate upstream member. In this setting, inbound orders from a downstream member serve as a valuable informational input to upstream production and inventory decisions. This paper claims that the information transferred in the form of “orders” tends to be distorted and can misguide upstream members in their inventory and production decisions. In particular, the variance of orders may be larger than that of sales, and the distortion tends to increase as one moves upstream—a phenomenon termed “bullwhip effect.” This paper analyzes four sources of the bullwhip effect: demand signal processing, rationing game, order batching, and price variations. Actions that can be taken to mitigate the detrimental impact of this distortion are also discussed.

The Bullwhip Effect In Supply Chain Reflections After A Decade

A decade has passed since the publication of the two seminal papers by Lee, Padmanabhan and Whang (1997) that describes the “bullwhip effect” in supply chains and characterizes its underlying causes. The bullwhip phenomenon is observed in supply chains where the decisions at the subsequent stages of the supply chain are made greedily based on local information, rather than through coordination based on global information on the state of the whole chain. The first consequence of this information distortion is higher variance in purchasing quantities compared to sales quantities at a particular supply chain stage. The second consequence is increasingly higher variance in order quantities and inventory levels in the upstream stages compared to their downstream stages (buyers). In this paper, we survey a decade of literature on the bullwhip effect and present the key insights reported by researchers and practitioners. We also present our reflections and share our vision of possible future.

BULLWHIP EFFECT IN SUPPLY CHAIN

A demand variability increase when it moves downstream to upstream in a supply chain, this phenomenon is known the 'Bullwhip effect'. This Bullwhip effect creates pile upon unnecessary inventory in the supply chain and reductions of this make a significant role. In this paper bullwhip effect causes are analyzed and the reducing measures are suggested, such as: Establishing the information sharing mechanism, Coordinating benefit of information sharing, establishing the strategic alliance, strengthening the cooperation & trust, strengthen the stock managing and reduce the lead time of the supply .

THE BULLWHIP EFFECT IN SUPPLY CHAIN

Predicting of demand is the significant tool in order the production planning and provisions, managing the surface or creating levels of personalized services. Predicting demand by many technologies is relying on earlier data and their importance is setting up from patterns utilized heretofore earlier of demand for near future. Of values predicted with regard to high responsiveness for of the ones most current, this approach is obtaining in general high (low) values of demand predicted in accordance to periods high (low) of demand. It is being transferred by demand of clients to wholesalers, distributors or producers in the form of the retail order which is current demand for partners of the chain of supplies of the higher mark at the same time. Forecasts of demand are rarely in practice when thorough and what's more they are still refer to the poor quality higher marks in the chain of supplies. In the majority of chains of supplies, individual participants in the chain are trying to rationalize sizes of one's orders in accordance to economic decisions, what the distortion of real demand of clients is being created, through as well as bad redirection of demand at members of the chain of supplies from upper of its levels. Promotions and price hesitation also have influence for distorting demand The need to predict demand is increasing errors by chances to perform on every level of the chain of supplies in forecasts-called the bullwhip effect (BWE) this way-for the whole supply chain. The seeming effect is creating it of double predicting [8]. And therefore it is so very important determining the operating system correctly of predicting of demand which the bullwhip effect will limit. The regular, simple model of supply chain and its flows consist such participants as: supplier, producer, intermediary or distributor, retailer and customer, all with products and information flows. This structure is presented below on figure 1. So taking into consideration the above mentioned model it is possible to do the graphical presentation of the bullwhip effect in supply chain especially with pressure on its formation.

Simulation-Based Statistical Analysis of the Bullwhip Effect in Supply Chains

2004

The paper proposes both statistical and simulation-based analysis and evaluation of the bullwhip effect in supply chains. The demand distortion, called the bullwhip effect, is considered as an important characteristic of supply chain operation stability. A mathematical justification of the stochastic demand as a cause of the bullwhip effect is discussed. Results of simulation studies to analyse the impact of information sharing strategies on the magnification of demand fluctuations as orders move up the supply chain are presented. An approach to measuring the bullwhip effect for the entire supply chain is proposed and practically applied for comparison of different supply chain’s configurations.