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Quantifying the Bullwhip Effect in a Simple Supply Chain: The Impact of Forecasting, Lead Times, and Information

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Author Info

  • Frank Chen

    ()
    (Decision Sciences Department, National University of Singapore, 119260 Singapore)

  • Zvi Drezner

    ()
    (Department of MS ... IS, California State University, Fullerton, California 92834)

  • Jennifer K. Ryan

    ()
    (School of Industrial Engineering, Purdue University, West Lafayette, Indiana 47907)

  • David Simchi-Levi

    ()
    (Department of IE ... MS, Northwestern University, Evanston, Illinois 60208)

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    Abstract

    An important observation in supply chain management, known as the bullwhip effect, suggests that demand variability increases as one moves up a supply chain. In this paper we quantify this effect for simple, two-stage supply chains consisting of a single retailer and a single manufacturer. Our model includes two of the factors commonly assumed to cause the bullwhip effect: demand forecasting and order lead times. We extend these results to multiple-stage supply chains with and without centralized customer demand information and demonstrate that the bullwhip effect can be reduced, but not completely eliminated, by centralizing demand information.

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    File URL: http://dx.doi.org/10.1287/mnsc.46.3.436.12069
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 46 (2000)
    Issue (Month): 3 (March)
    Pages: 436-443

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    Handle: RePEc:inm:ormnsc:v:46:y:2000:i:3:p:436-443

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    Related research

    Keywords: bullwhip effect; forecasting; information; inventory; lead time; supply chain; variability;

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