Issues on the reduction of demand variance in the supply chain

To streamline an agile manufacturing system of a global firm facing a high demand of market service, supply chain management (SCM) plays an important role. In SCM, a phenomenon called ‘the bullwhip effect’ has attracted considerable attention. This study examines the bullwhip effect caused by order variance from retailers. It shows that based on portfolio theory, supplier's demand variance can be reduced by adjusting the order quantities of retailers through co-ordination. The results indicate that our approach can be a useful means for alleviating the bullwhip effect.