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The bullwhip effect in supply chains--An overestimated problem?

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  • Sucky, Eric

Abstract

A phenomenon that is now well known as the bullwhip effect suggests that the variability of orders increases as they move up the supply chain from retailers to wholesalers to manufacturers to suppliers. In this paper, we will focus mainly on measuring the bullwhip effect. Existing approaches that aim at quantifying the bullwhip effect neglect the network structure of supply chains. By only assuming a simple two-stage supply chain consisting of a single retailer and a single manufacturer, some of the relevant risk pooling effects associated with the network structure of supply chains are disregarded. Risk pooling effects arise when the orders, which a retailer receives from its customers, are statistically correlated with a coefficient of correlation less than one. When analyzing the bullwhip effect in supply chains, however, the influence of risk pooling has to be considered. The fact that these influences have not yet been analyzed motivates the research presented in this paper. We will show that the bullwhip effect is overestimated if just a simple supply chain is assumed and risk pooling effects are present.

Suggested Citation

  • Sucky, Eric, 2009. "The bullwhip effect in supply chains--An overestimated problem?," International Journal of Production Economics, Elsevier, vol. 118(1), pages 311-322, March.
  • Handle: RePEc:eee:proeco:v:118:y:2009:i:1:p:311-322
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    Cited by:

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    4. Scarpin, Marcia Regina Santiago & Scarpin, Jorge Eduardo & Krespi Musial, Nayane Thais & Nakamura, Wilson Toshiro, 2022. "The implications of COVID-19: Bullwhip and ripple effects in global supply chains," International Journal of Production Economics, Elsevier, vol. 251(C).
    5. de Lima, Daruichi Pereira & Fioriolli, José Carlos & Padula, Antonio Domingos & Pumi, Guilherme, 2018. "The impact of Chinese imports of soybean on port infrastructure in Brazil: A study based on the concept of the “Bullwhip Effect”," Journal of Commodity Markets, Elsevier, vol. 9(C), pages 55-76.
    6. Lim, Kendrik Yan Hong & Dang, Le Van & Chen, Chun-Hsien, 2024. "Incorporating supply and production digital twins to mitigate demand disruptions in multi-echelon networks," International Journal of Production Economics, Elsevier, vol. 273(C).
    7. Pedroso, Marcelo Caldeira & Nakano, Davi, 2009. "Knowledge and information flows in supply chains: A study on pharmaceutical companies," International Journal of Production Economics, Elsevier, vol. 122(1), pages 376-384, November.
    8. Sodhi, ManMohan S. & Tang, Christopher S., 2011. "The incremental bullwhip effect of operational deviations in an arborescent supply chain with requirements planning," European Journal of Operational Research, Elsevier, vol. 215(2), pages 374-382, December.
    9. Koussaila Hamiche & Michel Fliess & Cédric Join & Hassane Abouaïssa, 2019. "Bullwhip effect attenuation in supply chain management via control-theoretic tools and short-term forecasts: A preliminary study with an application to perishable inventories," Post-Print hal-02050480, HAL.
    10. Trapero, Juan R. & Pedregal, Diego J., 2016. "A novel time-varying bullwhip effect metric: An application to promotional sales," International Journal of Production Economics, Elsevier, vol. 182(C), pages 465-471.
    11. K. Devika & A. Jafarian & A. Hassanzadeh & R. Khodaverdi, 2016. "Optimizing of bullwhip effect and net stock amplification in three-echelon supply chains using evolutionary multi-objective metaheuristics," Annals of Operations Research, Springer, vol. 242(2), pages 457-487, July.
    12. Gebennini, Elisa & Grassi, Andrea & Rimini, Bianca & Depietri, Eleonora, 2013. "Costs and opportunities of moving picking activities upstream in distribution networks: A case study from the beverage industry," International Journal of Production Economics, Elsevier, vol. 143(2), pages 342-348.
    13. Carole Camisullis & Vincent Giard & Gisele Mendy-Bilek, 2011. "Information to share in supply chains dedicated to the mass production of customized products for decentralized management," Working Papers hal-00876865, HAL.
    14. Wang, Xun & Disney, Stephen M., 2016. "The bullwhip effect: Progress, trends and directions," European Journal of Operational Research, Elsevier, vol. 250(3), pages 691-701.
    15. Sadeghi, Ahmad, 2015. "Providing a measure for bullwhip effect in a two-product supply chain with exponential smoothing forecasts," International Journal of Production Economics, Elsevier, vol. 169(C), pages 44-54.
    16. Zhu, Tianyuan & Balakrishnan, Jaydeep & da Silveira, Giovani J.C., 2020. "Bullwhip effect in the oil and gas supply chain: A multiple-case study," International Journal of Production Economics, Elsevier, vol. 224(C).
    17. Changjoon Lee & Byoung-Chun Ha, 2021. "Interactional Justice, Informational Quality, and Sustainable Supply Chain Management: A Comparison of Domestic and Multinational Pharmaceutical Companies," Sustainability, MDPI, vol. 13(2), pages 1-16, January.
    18. Dominguez, Roberto & Cannella, Salvatore & Framinan, Jose M., 2021. "Remanufacturing configuration in complex supply chains," Omega, Elsevier, vol. 101(C).
    19. Lampret Tadeja & Potočan Vojko, 2014. "Bullwhip Effect in the Information Flow of a Supply Chain: A Role of Culture," Logistics, Supply Chain, Sustainability and Global Challenges, Sciendo, vol. 5(1), pages 34-45, November.
    20. Dominguez, Roberto & Cannella, Salvatore & Framinan, Jose M., 2015. "On returns and network configuration in supply chain dynamics," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 73(C), pages 152-167.
    21. Fakhrul Hasan & Mary Fiona Ross Bellenstedt & Mohammad Raijul Islam, 2023. "Demand and Supply Disruptions During the Covid-19 Crisis on Firm Productivity," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 24(1), pages 87-105, March.
    22. Schlaich, Tim & Hoberg, Kai, 2024. "When is the next order? Nowcasting channel inventories with Point-of-Sales data to predict the timing of retail orders," European Journal of Operational Research, Elsevier, vol. 315(1), pages 35-49.
    23. Cannella, Salvatore & Dominguez, Roberto & Framinan, Jose M., 2017. "Inventory record inaccuracy – The impact of structural complexity and lead time variability," Omega, Elsevier, vol. 68(C), pages 123-138.

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