Information distortion in a supply chain: the bullwhip effect
Management Science - Special issue on frontier research in manufacturing and logistics
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Bullwhip effect is defined as the distortion of demand information as one moves upstream in the supply chain. Ordering policies have been recognized as one of the most important operational causes of bullwhip effect. This paper investigates the impact of various classical ordering policies on ordering and inventories behaviors in a multi-echelon supply chain through a simulation study. In addition, a proposed ordering policy that relies on information sharing in a decentralized way is proposed to mitigate the bullwhip effect and overcome the problems of the classical ordering policies. A simulation model has been developed for a four-echelon supply chain, with deterministic ordering and delivery lead times, in order to analyze the supply chain performances under the different ordering policies. The simulation results show that the proposed ordering policy succeeds to mitigate the bullwhip effect and achieve an acceptable performance in terms of variance of inventory level as well.