Alalysis Of The Bullwhip Effect In The Supply Chain Based Oninventory

Early studides have attempted to investigate the bullwhip effect and identified this effect as the bullwhip effect on product orders.However,because the bullwhip effect on product orders mainly contributes to upstream costs,previous research on the bullwhip effect on product orders relies on the perspective of the supply chain upstream.This research introduces the bullwhip effect on inventory as a new performance measure of the supply chain downstream.Therefore,this research analyses the bullwhip effec on products ordrs and inventory from the perspective of the entire supply chain,i.e.,both from upstream and downstream perspectives of the supply chain.Additionally,different from previous assumption that the demand follows a first-order autoregressive(AR(1))process,this research analyses a price-sensitive demand function whereby the price is an AR(1)pricing process.Therefore,this reserch focus on a different perspective to explain the impact of demand process characteristics,which include the market demand scale,the price sensitivity coefficient,and the price correlation coefficient on the bullwhip effect on product orders and inventory.This research first introducesthe background of the bullwhip effect and then explains itscontent,research process,and applications.There is a vast body of literature on the bullwhip effect.This research is built on two lines of this literature: the tradetional studies on the bullwhip effect on product orders and the relative studies on the bullwhip effect on inventory.Consider a simple two-level supply chain with a manufacturer and a retailer,where the order-up-to inventory policy is adopted by the supply chain,this research derives the analytical expressions of the bullwhip effect on product orders and inventoy with minimum mean-squared error(MMSE),moving average(MA)and exponential smoothing(ES)techniques.This research introduces the weighted sum of the two bullwhip effect mearsures and obtaines the conditions for choosing among the three techniques the best one that minimizes the weighted bullwhip effect.1)The market demand scale has no effect on the bullwhip effect on product orders and inventory;therefore,it does not influence the retailer's choice.2)If the supply chain pays less attention on product orders,or when the product price sensitivity coefficient is small,the retailer should choose MMSE technique.3)For products with a larger price sensitivity coefficient and a larger price correlation coefficient,if the supply chain pays more attention on the bullwhip effect on product orders,then the retailer should choose ES technique.4)When products with a medium price correlation coefficient have a small lead time and abundant historical demand information,if the supply chain pays more attention on the bullwhip effect on product orders,the retailer should choose MA technique.This research then extends the basic two-level supply chain to a three-level supply chain,which consists of a manufacturer,a wholesaler,and a retailer.The whole supply chain adopt the order-up-to inventory policy and MMSE forecasting technique.Based on the analytical expressions of the bullwhip effect on product orders and inventory with and without information sharing,this reserch analyses the impact of demand process characteristics on the value of information sharing.The results showed that: 1)Because the market demand scale has no effect on the bullwhip effect on product on orders and inventoy,it does not influence the value of information sharing.2)The value of information sharing on restricting the bullwhip effect on product orders and inventory is significant when the underlying overall market pricing process is highly correlated over time,the product price sensitivity coefficient is small,the overall market shocks are low,the retailer lead time is long,or when the demand shocks specific to the retailer are high.This research also studies two-parallel supply chains,each consisting of a manufacturer and a retailer,and the external demand for a single product depends on its price and the other's price.Based on the assumption of order-up-to inventory policy and MMSE forecasting technique,This research proposes an analytical framework that incorporates two-parallel supply chains,and explores their interactions to determine the bullwhip effect on product orders and inventory.The results showed that:1)Compared with the model of a serial supply chain in which the product demand solely depends on its own price,the introduction of the interacting price sensitivity coefficients and the cross-covariance of price evolutions may increase or dampen the bullwhip effect on product orders and inventory.2)For the case in which the two competitive supply chains exhibit interactions because of product substitution,if the product in one supply chain has a a small interacting price sensitivity coefficient,then the bullwhip effect on product on orders and inventory is likely to be lessened when the price evolution covariance between the two supply chains is large.3)When the two-parallel supply chains are partners or their products are complementary,if the product in one supply chain has a large absolute interacting price sensitivity coefficient,then the interaction between the two supply chains can dampen the bullwhip effect on product on orders and inventory when the price evolution covariance between the two supply chains is small.At last,this research presents the conclusions and suggests some follow-up research directions.The findings of this reserch,the bullwhip effect on product orders and inventory,could provide valuabe insights to the managers when evaluating the supply chain system.