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Controlling bullwhip and inventory variability with the golden smoothing rule

Author

Listed:
  • Stephen M. Disney
  • Ingrid Farasyn
  • Marc R. Lambrecht
  • Denis R. Towill
  • Wim Van De Velde

Abstract

A major cause of supply chain deficiencies is the bullwhip effect. Supply chain managers experience this variance amplification in both inventory levels and replenishment orders. In this paper, we analyse a major cause of the bullwhip effect, namely the classical Order-Up-To (OUT) policy and suggest a remedy (a smoothing replenishment rule). In general, dampening variability in orders may have a negative impact on customer service due to increase in inventory variance. We quantify the variance of the Net Stock (NS) levels and compute the required safety stock as a function of the smoothing required. The contribution of this paper is the analysis of the tradeoff between bullwhip and inventory variance resulting in a 'golden smoothing rule'. The golden smoothing rule refers to the fact that the values of two proportional feedback controllers are set equal to the Golden Ratio. [Received 5 September 2006; Revised 22 January 2007; Accepted 13 March 2007]

Suggested Citation

  • Stephen M. Disney & Ingrid Farasyn & Marc R. Lambrecht & Denis R. Towill & Wim Van De Velde, 2007. "Controlling bullwhip and inventory variability with the golden smoothing rule," European Journal of Industrial Engineering, Inderscience Enterprises Ltd, vol. 1(3), pages 241-265.
    • Handle: RePEc:ids:eujine:v:1:y:2007:i:3:p:241-265
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    Citations

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    Cited by:

    1. Dejian Yu & Zhaoping Yan, 2021. "Knowledge diffusion of supply chain bullwhip effect: main path analysis and science mapping analysis," Scientometrics, Springer;Akadémiai Kiadó, vol. 126(10), pages 8491-8515, October.
    2. Ciancimino, Elena & Cannella, Salvatore & Bruccoleri, Manfredi & Framinan, Jose M., 2012. "On the Bullwhip Avoidance Phase: The Synchronised Supply Chain," European Journal of Operational Research, Elsevier, vol. 221(1), pages 49-63.
    3. Ciancimino, Elena & Cannella, Salvatore & Canca Ortiz, José David & Framiñán Torres, José Manuel, 2009. "Análisis multinivel de cadenas de suministros: dos técnicas de resolución del efecto bullwhip // Supply Chain Multi-level Analysis: Two Bullwhip Dampening Approaches," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 8(1), pages 7-28, December.
    4. Yu, Dejian & Yan, Zhaoping, 2023. "Main path analysis considering citation structure and content: Case studies in different domains," Journal of Informetrics, Elsevier, vol. 17(1).
    5. 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.

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