A win-win solution for the bullwhip problem

Robert Boute, Stephen M. Disney, Marc R. Lambrecht, Benny Van Houdt

Research output: Contribution to journalArticle

22 Scopus citations

Abstract

An important supply chain research problem is the bullwhip effect where demand variability increases as one moves up the supply chain. This distorted information may lead to inefficiencies. In this article we suggest a remedy to reduce the bullwhip effect. We focus on an inventory replenishment rule that reduces the variability of upstream orders and generates a smooth order pattern. However, dampening the order variability has a negative impact on customer service due to an increased inventory variance. We resolve this conflicting issue by taking the impact of the replenishment rule on lead times into account. A smooth order pattern generates shorter and less variable (production/ replenishment) lead times, introducing a compensating effect on the inventory levels. We show that by including endogenous lead times in our analysis, the order pattern can be smoothed to a considerable extent without increasing stock levels, resulting in a win-win solution for both supply chain echelons. Finally we discuss several order smoothing approaches from an industrial perspective and comment on how our results may influence these cases.

Original languageEnglish (US)
Pages (from-to)702-711
Number of pages10
JournalProduction Planning and Control
Volume19
Issue number7
DOIs
StatePublished - Oct 1 2008

Keywords

  • Bullwhip effect
  • Supply chain collaboration
  • Supply chain control

ASJC Scopus subject areas

  • Computer Science Applications
  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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