An analytical investigation of the Bullwhip Effect

An analytical investigation of the Bullwhip Effect

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Article ID: iaor2005855
Country: United States
Volume: 13
Issue: 2
Start Page Number: 150
End Page Number: 160
Publication Date: Jun 2004
Journal: Production and Operations Management
Authors:
Keywords: bullwhip effect, supply chain
Abstract:

The Bullwhip Effect is problematic: order variability increases as orders propagate along the supply chain. The fundamental differential delay equations for a retailer's inventory reacting to a surge in demand are solved exactly. Much of the rich and complex inventory behavior is determined by the replenishment delay. The analytical solutions agree with numerical integrations and previous control theory results. Managerially useful ordering strategies are proposed. Exact expressions are derived for the retailer's orders to the manufacturer, and the Bullwhip Effect arises naturally. The approach is quite general and applicable to a wide variety of supply chain problems.

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