Title
A win-win solution for the bullwhip problem A win-win solution for the bullwhip problem
Author
Faculty/Department
Faculty of Sciences. Mathematics and Computer Science
Publication type
article
Publication
London ,
Subject
Economics
Mathematics
Engineering sciences. Technology
Source (journal)
Production planning and control. - London
Volume/pages
19(2008) :7 , p. 702-711
ISSN
0953-7287
ISI
000261495000008
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
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.
E-info
https://repository.uantwerpen.be/docman/iruaauth/7315b2/8736980.pdf
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