Research On Bullwhip Effect Under BTO

Bullwhip effect is a common phenomenon in the supply chain. It makes firms difficult to get the right market demand and stock a lot of inventories and then makes the whole supply chain operate in rather low efficiency. Current research literature focuses on the bullwhip effect under the Build-to-forecast (BTF) mode but this paper focuses on the bullwhip effect under the Build-to-order (BTO) mode.A model is formulated on the bullwhip effect under the BTO mode, the existence of the bullwhip effect is approved through numerical experiments, and the differences between the bullwhip effect under BTO and BTF are investigated. The main contents are as the following: Firstly, the characteristics of BTO and BTF are analyzed and the two modes are classified according to the customer order decoupling point (CODP) at different stages such as product development, production, sale and etc. Secondly, a two-stage supply chain of a manufacturer and a retailer is considered. Both the manufacturer and the retailer operate under the BTO mode. From the perspective of both stages trying to minimize the inventory cost and lost sale cost, the effects of demand variability, price variability, and minimum shipping lot on the bullwhip effect under the BTO mode are analyzed. The results show that the anti-bullwhip effect is more obvious with larger demand variability; price variability has a reverse effect on the anti-bullwhip effect; and the minimum shipping lot affects the form of the anti-bullwhip effect.Lastly, the causes and damages of the bullwhip effect under the BTO and BTF are compared and the countermeasure for the bullwhip effect under the BTO and BTF are presented.Our research shows that the bullwhip effect exists in a special form of the anti-bullwhip effect in a two-stage supply chain under BTO mode; the damage of the anti-bullwhip effect on the supply chain is smaller than the damage of the bullwhip effect under BTF.