Exploring the Bullwhip Effect by Means of Spreadsheet Simulation
Boute, Robert N Lambrecht, Marc R
Boute, Robert N
Lambrecht, Marc R
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Publication Type
Conference Proceeding
Editor
Supervisor
Publication Year
2009-09
Journal
Book
INFORMS Transactions on Education
Publication Volume
10
Publication Issue
1
Publication Begin page
Publication End page
Publication Number of pages
33
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Abstract
One of the main supply chain deficiencies is the bullwhip effect: Demand fluctuations increase as one moves up the supply chain from retailer to manufacturer. The beer distribution game is widely known for illustrating these supply chain dynamics in class. In this paper we present a spreadsheet exploring the two key causes of the bullwhip effect: demand forecasting and the type of ordering policy. We restrict our attention to a single product two-echelon system and illustrate how tuning the parameters of the replenishment policy induces or reduces the bullwhip effect. We also demonstrate how bullwhip reduction (dampening the order variability) may have an adverse impact on inventory holdings or customer service. The spreadsheet can be used to help students gain insight into how inventory control policies and forecasting influence the magnitude of the bullwhip effect and the quality of customer service.
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Keywords
3509 Transportation, Logistics and Supply Chains, 35 Commerce, Management, Tourism and Services, 3507 Strategy, Management and Organisational Behaviour