Bullwhip Effect
MANAGING THE BULLWHIP EFFECT
Joseph H. Wilck, IV
Ph.D. Dual Degree, Industrial Engineering and Operations Research, College of Engineering
The bullwhip effect is the inherent increase in demand fluctuation up the supply chain (i.e., away from customer). Managing the bullwhip effect is minimizing the fluctuation and variation of the demand (i.e., orders from one stage of a supply chain to the next stage of the supply chain) throughout the supply chain. This paper will offer a literature review of this topic, note the key contributions, discuss current practices for managing the bullwhip effect, and explain why it is necessary for more research to be done in the area, specifically for continuous review policies.
Orders/Time Period
ABSTRACT
Time
1. INTRODUCTION
Demand
Retailer
Factory
Figure 1.1: The Bullwhip Effect
The bullwhip effect is the inherent increase in demand fluctuation up the supply chain (i.e., away from customer), as shown in Figure 1.1. Managing the bullwhip effect is minimizing the fluctuation and variation of the demand (i.e., orders from one stage of a supply chain to the next stage of the supply chain) throughout the supply chain.
In order to effectively manage the bullwhip effect, the primary causes of the bullwhip effect must be understood.
The main causes of the bullwhip effect were identified, and analytical proofs were constructed to show why these four causes contributed to the bullwhip effect and solutions were offered to manage the bullwhip effect by
Lee, Padmanabhan, and Whang [9] and [10].
The idea of businesses sharing information was introduced by Forrester [5]. This concept, when extended to individual businesses within a supply chain, is considered the best strategy when trying to reduce the bullwhip effect. However, it is impossible to completely eliminate the bullwhip effect from a supply chain (at least, in realistic supply chains).
The main purposes of this paper are to:
Joseph H. Wilck, IV
Ph.D. Dual Degree, Industrial Engineering and Operations Research, College of Engineering
The bullwhip effect is the inherent increase in demand fluctuation up the supply chain (i.e., away from customer). Managing the bullwhip effect is minimizing the fluctuation and variation of the demand (i.e., orders from one stage of a supply chain to the next stage of the supply chain) throughout the supply chain. This paper will offer a literature review of this topic, note the key contributions, discuss current practices for managing the bullwhip effect, and explain why it is necessary for more research to be done in the area, specifically for continuous review policies.
Orders/Time Period
ABSTRACT
Time
1. INTRODUCTION
Demand
Retailer
Factory
Figure 1.1: The Bullwhip Effect
The bullwhip effect is the inherent increase in demand fluctuation up the supply chain (i.e., away from customer), as shown in Figure 1.1. Managing the bullwhip effect is minimizing the fluctuation and variation of the demand (i.e., orders from one stage of a supply chain to the next stage of the supply chain) throughout the supply chain.
In order to effectively manage the bullwhip effect, the primary causes of the bullwhip effect must be understood.
The main causes of the bullwhip effect were identified, and analytical proofs were constructed to show why these four causes contributed to the bullwhip effect and solutions were offered to manage the bullwhip effect by
Lee, Padmanabhan, and Whang [9] and [10].
The idea of businesses sharing information was introduced by Forrester [5]. This concept, when extended to individual businesses within a supply chain, is considered the best strategy when trying to reduce the bullwhip effect. However, it is impossible to completely eliminate the bullwhip effect from a supply chain (at least, in realistic supply chains).
The main purposes of this paper are to:
References: Information,” Management Science, 46(3), 436–443, 2000. [2] Chen, F., and R. Samroengraja. “Order Volatility and Supply Chain Costs,” Operations Research, 52(5), 707722, 2004. Effect: A Control Theoretic Approach,” European Journal of Operational Research, 147, 567-590, 2003. [5] Forrester, J.W. “Industrial Dynamics,” Harvard Business Review, July-August, 1958. html), Mike Shor, 2001-2005. [7] Gilbert, K. “An ARIMA Supply Chain Model,” Management Science, 51(2), 305-310, 2005. “Information Distortion in a Supply Chain: The Bullwhip Effect,” Management Science, 43(4), 546-558, 1997a. Review, 38(Spring), 93-102, 1997b. 1887-1893, 2004. Journal, 8(4), 317-323, 2003. 15(2), 89-100, 1997. Fourth Edition, McGraw-Hill, 336-352, 2001.