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The value of inventory and the direction of the supply chain bullwhip effect

Author

Listed:
  • Sima M. Fortsch
  • Elena A. Khapalova

Abstract

The bullwhip effect (BWE) is the amplification of demand variability in a supply chain and can be quite costly for industry and society. In this empirical investigation of the BWE a three-stage supply chain is examined using monthly industry-level data. Time series regression equations are used to detect the BWE and its direction. Empirical evidence is found suggesting the BWE of a supply chain member is influenced by the BWE of the other members, as well as the values of inventory and inventory to sales ratios of own member and other members of supply chain. In addition, there is evidence that the direction of the BWE is not influenced by the members' horizontal positions in the network. It is shown that the wholesale BWE exhibits heteroscedastic and non-stationary behaviour; thus, making it difficult to predict over a long-horizon time period, unlike the BEW of the manufacturing and retail industries.

Suggested Citation

  • Sima M. Fortsch & Elena A. Khapalova, 2018. "The value of inventory and the direction of the supply chain bullwhip effect," International Journal of Business and Systems Research, Inderscience Enterprises Ltd, vol. 12(4), pages 391-410.
    • Handle: RePEc:ids:ijbsre:v:12:y:2018:i:4:p:391-410
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