IDEAS home Printed from https://ideas.repec.org/a/wly/navres/v47y2000i4p269-286.html
   My bibliography  Save this article

The impact of exponential smoothing forecasts on the bullwhip effect

Author

Listed:
  • Frank Chen
  • Jennifer K. Ryan
  • David Simchi‐Levi

Abstract

An important phenomenon often observed in supply chain management, known as the bullwhip effect, implies that demand variability increases as one moves up the supply chain, i.e., as one moves away from customer demand. In this paper we quantify this effect for simple, two‐stage, supply chains consisting of a single retailer and a single manufacturer. We demonstrate that the use of an exponential smoothing forecast by the retailer can cause the bullwhip effect and contrast these results with the increase in variability due to the use of a moving average forecast. We consider two types of demand processes, a correlated demand process and a demand process with a linear trend. We then discuss several important managerial insights that can be drawn from this research. © 2000 John Wiley & Sons, Inc. Naval Research Logistics 47: 269–286, 2000

Suggested Citation

  • Frank Chen & Jennifer K. Ryan & David Simchi‐Levi, 2000. "The impact of exponential smoothing forecasts on the bullwhip effect," Naval Research Logistics (NRL), John Wiley & Sons, vol. 47(4), pages 269-286, June.
    • Handle: RePEc:wly:navres:v:47:y:2000:i:4:p:269-286
    DOI: 10.1002/(SICI)1520-6750(200006)47:43.0.CO;2-Q
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/(SICI)1520-6750(200006)47:43.0.CO;2-Q
    Download Restriction: no
    File URL: https://libkey.io/10.1002/(SICI)1520-6750(200006)47:43.0.CO;2-Q?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Manuel P. Baganha & Morris A. Cohen, 1998. "The Stabilizing Effect of Inventory in Supply Chains," Operations Research, INFORMS, vol. 46(3-supplem), pages 72-83, June.
    2. M. Eric Johnson & Hau L. Lee & Tom Davis & Robert Hall, 1995. "Expressions for item fill rates in periodic inventory systems," Naval Research Logistics (NRL), John Wiley & Sons, vol. 42(1), pages 57-80, February.
    3. John D. Sterman, 1989. "Modeling Managerial Behavior: Misperceptions of Feedback in a Dynamic Decision Making Experiment," Management Science, INFORMS, vol. 35(3), pages 321-339, March.
    4. Kahn, James A, 1987. "Inventories and the Volatility of Production," American Economic Review, American Economic Association, vol. 77(4), pages 667-679, September.
    5. Hau L. Lee & V. Padmanabhan & Seungjin Whang, 1997. "Information Distortion in a Supply Chain: The Bullwhip Effect," Management Science, INFORMS, vol. 43(4), pages 546-558, April.
    6. Caplin, Andrew S, 1985. "The Variability of Aggregate Demand with (S, s) Inventory Policies," Econometrica, Econometric Society, vol. 53(6), pages 1395-1409, November.
    7. Sterman, John D., 1989. "Misperceptions of feedback in dynamic decision making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 43(3), pages 301-335, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ma, Yungao & Wang, Nengmin & He, Zhengwen & Lu, Jizhou & Liang, Huigang, 2015. "Analysis of the bullwhip effect in two parallel supply chains with interacting price-sensitive demands," European Journal of Operational Research, Elsevier, vol. 243(3), pages 815-825.
    2. Li Chen & Hau L. Lee, 2012. "Bullwhip Effect Measurement and Its Implications," Operations Research, INFORMS, vol. 60(4), pages 771-784, August.
    3. Ouyang, Yanfeng & Daganzo, Carlos, 2008. "Robust tests for the bullwhip effect in supply chains with stochastic dynamics," European Journal of Operational Research, Elsevier, vol. 185(1), pages 340-353, February.
    4. Yanfeng Ouyang & Carlos Daganzo, 2006. "Characterization of the Bullwhip Effect in Linear, Time-Invariant Supply Chains: Some Formulae and Tests," Management Science, INFORMS, vol. 52(10), pages 1544-1556, October.
    5. QU, Zhan & RAFF, Horst, 2023. "Two-part tariffs, inventory stockpiling, and the bullwhip effect," European Journal of Operational Research, Elsevier, vol. 308(1), pages 201-214.
    6. Gérard P. Cachon & Taylor Randall & Glen M. Schmidt, 2007. "In Search of the Bullwhip Effect," Manufacturing & Service Operations Management, INFORMS, vol. 9(4), pages 457-479, April.
    7. Duc, Truong Ton Hien & Luong, Huynh Trung & Kim, Yeong-Dae, 2008. "A measure of bullwhip effect in supply chains with a mixed autoregressive-moving average demand process," European Journal of Operational Research, Elsevier, vol. 187(1), pages 243-256, May.
    8. Ouyang, Yanfeng & Li, Xiaopeng, 2010. "The bullwhip effect in supply chain networks," European Journal of Operational Research, Elsevier, vol. 201(3), pages 799-810, March.
    9. Ouyang, Yanfeng, 2007. "The effect of information sharing on supply chain stability and the bullwhip effect," European Journal of Operational Research, Elsevier, vol. 182(3), pages 1107-1121, November.
    10. Rachel Croson & Karen Donohue, 2002. "Experimental Economics and Supply-Chain Management," Interfaces, INFORMS, vol. 32(5), pages 74-82, October.
    11. Tangsucheeva, Rattachut & Prabhu, Vittaldas, 2014. "Stochastic financial analytics for cash flow forecasting," International Journal of Production Economics, Elsevier, vol. 158(C), pages 65-76.
    12. Ouyang, Yanfeng & Daganzo, Carlos, 2006. "Counteracting the bullwhip effect with decentralized negotiations and advance demand information," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 363(1), pages 14-23.
    13. Ton Hien Duc, Truong & Luong, Huynh Trung & Kim, Yeong-Dae, 2010. "Effect of the third-party warehouse on bullwhip effect and inventory cost in supply chains," International Journal of Production Economics, Elsevier, vol. 124(2), pages 395-407, April.
    14. 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.
    15. Jaksic, Marko & Rusjan, Borut, 2008. "The effect of replenishment policies on the bullwhip effect: A transfer function approach," European Journal of Operational Research, Elsevier, vol. 184(3), pages 946-961, February.
    16. Hau L. Lee & V. Padmanabhan & Seungjin Whang, 2004. "Information Distortion in a Supply Chain: The Bullwhip Effect," Management Science, INFORMS, vol. 50(12_supple), pages 1875-1886, December.
    17. Sodhi, ManMohan S. & Tang, Christopher S., 2011. "The incremental bullwhip effect of operational deviations in an arborescent supply chain with requirements planning," European Journal of Operational Research, Elsevier, vol. 215(2), pages 374-382, December.
    18. Robert L. Bray & Haim Mendelson, 2012. "Information Transmission and the Bullwhip Effect: An Empirical Investigation," Management Science, INFORMS, vol. 58(5), pages 860-875, May.
    19. Stephen C. Graves, 1999. "A Single-Item Inventory Model for a Nonstationary Demand Process," Manufacturing & Service Operations Management, INFORMS, vol. 1(1), pages 50-61.
    20. Fangruo Chen, 1999. "Decentralized Supply Chains Subject to Information Delays," Management Science, INFORMS, vol. 45(8), pages 1076-1090, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:navres:v:47:y:2000:i:4:p:269-286. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1002/(ISSN)1520-6750 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.