Article ID: | iaor200162 |
Country: | United States |
Volume: | 46 |
Issue: | 3 |
Start Page Number: | 436 |
End Page Number: | 443 |
Publication Date: | Mar 2000 |
Journal: | Management Science |
Authors: | Drezner Zvi, Simchi-Levi David, Chen Frank, Ryan Jennifer K. |
Keywords: | forecasting: applications, supply |
An important observation in supply chain management, known as the bullwhip effect, suggests that demand variability increases as one moves up a supply chain. In this paper we quantify this effect for simple, two-stage supply chains consisting of a single retailer and a single manufacturer. Our model includes two of the factors commonly assumed to cause the bullwhip effect: demand forecasting and order lead times. We extend these results to multiple-stage supply chains with and without centralized customer demand information and demonstrate that the bullwhip effect can be reduced, but not completely eliminated, by centralizing demand information.