The effect of replenishment policies on the bullwhip effect: A transfer function approach

An important phenomenon in supply chain management, known as the bullwhip effect, suggests that demand variability increases as one moves up a supply chain. This paper examines the influence of different replenishment policies on the occurrence of the bullwhip effect. The paper demonstrates that cer...

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Bibliographic Details
Published in:European journal of operational research 2008-02, Vol.184 (3), p.946-961
Main Authors: Jakšič, Marko, Rusjan, Borut
Format: Article
Language:English
Subjects:
Bullwhip effect
Demand
Impact analysis
Operations research
Replenishment rule
Studies
Supply chain management
Transfer function
Variability
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Summary:An important phenomenon in supply chain management, known as the bullwhip effect, suggests that demand variability increases as one moves up a supply chain. This paper examines the influence of different replenishment policies on the occurrence of the bullwhip effect. The paper demonstrates that certain replenishment policies can in themselves be inducers of the bullwhip effect, while others inherently lower demand variability. The main causes of increase in variability are projections of future demand expectations, which result in over-exaggerated responses to changes in demand. We suggest that through appropriate selection and use of certain replenishment rules, the bullwhip effect can be avoided, subsequently allowing supply chain management costs to be lowered.
ISSN:0377-2217
1872-6860
DOI:10.1016/j.ejor.2006.12.018