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Modeling and analysis of cash-flow bullwhip in supply chain

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  • Tangsucheeva, Rattachut
  • Prabhu, Vittaldas

Abstract

The bullwhip effect that occurs in supply chain inventory can distort demand forecasts and lead to inefficiencies such as excessive inventory, stock-outs, and backorders. In this paper we theorize that inventory bullwhip also leads to cash-flow bullwhip (CFB). Specifically, this paper focuses on studying CFB by developing mathematical and simulation models to analyze the relationship between inventory and cash-flow bullwhip by using Cash Conversion Cycle (CCC) as a metric. The mathematical models for inventory bullwhip are developed for two-stage and generic multi-stage supply chains, and then by extending these inventory models, the CFB models are developed for two-stage. CFB predicted by the proposed mathematical models approximately differ 14% from detailed simulation models. We find that increasing variability increases inventory and cash-flow bullwhip along with lead time, whereas increasing the demand observation period has the opposite effect. The average marginal impact of the bullwhip effect on the CFB is approximately 20%. Additionally, the CFB is also an increasing function of an expected value of inventory and a decreasing function of an expected value of demand.

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  • Tangsucheeva, Rattachut & Prabhu, Vittaldas, 2013. "Modeling and analysis of cash-flow bullwhip in supply chain," International Journal of Production Economics, Elsevier, vol. 145(1), pages 431-447.
    • Handle: RePEc:eee:proeco:v:145:y:2013:i:1:p:431-447
    DOI: 10.1016/j.ijpe.2013.04.054
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    References listed on IDEAS

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    Cited by:

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    3. Patil, Chintan & Prabhu, Vittaldas, 2024. "Supply chain cash-flow bullwhip effect: An empirical investigation," International Journal of Production Economics, Elsevier, vol. 267(C).
    4. Chih-Yang Tsai, 2017. "The impact of cost structure on supply chain cash flow risk," International Journal of Production Research, Taylor & Francis Journals, vol. 55(22), pages 6624-6637, November.
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    9. Hicham Lamzaouek & Hicham Drissi & Naima El Haoud, 2021. "Cash Flow Bullwhip—Literature Review and Research Perspectives," Logistics, MDPI, vol. 5(1), pages 1-9, January.
    10. Schwab, Leila & Gold, Stefan & Reiner, Gerald, 2019. "Exploring financial sustainability of SMEs during periods of production growth: A simulation study," International Journal of Production Economics, Elsevier, vol. 212(C), pages 8-18.
    11. Özelkan, Ertunga C. & Lim, Churlzu & Adnan, Ziaul Haq, 2018. "Conditions of reverse bullwhip effect in pricing under joint decision of replenishment and pricing," International Journal of Production Economics, Elsevier, vol. 200(C), pages 207-223.
    12. Tangsucheeva, Rattachut & Prabhu, Vittaldas, 2014. "Stochastic financial analytics for cash flow forecasting," International Journal of Production Economics, Elsevier, vol. 158(C), pages 65-76.
    13. Gaban Lucian, 2016. "Cash Flows In Romanian Small And Medium Enterprises," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 46-52, August.

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