IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v189y2008i1p172-193.html
   My bibliography  Save this article

Measuring endogenous supply chain volatility: Beyond the bullwhip effect

Author

Listed:
  • Kim, Ilhyung
  • Springer, Mark

Abstract

Most recent research on supply chain volatility has focused on one particular dimension of that volatility, namely the amplification of upstream order variability. While not ignoring this aspect of supply chain volatility, we focus on a different but equally critical aspect of volatility: the cyclical oscillation of on-hand and on-order inventories about their target values. We prove that such cyclicality does not require oscillatory or random retailer demand as a prerequisite; the resulting volatility is therefore endogenous rather than simply an amplification of exogenous demand inputs. We also measure the amount of amplification resulting from a step increase in demand. The order amplification is the product of two factors, each of which is clearly linked to either on-hand or on-order inventory. Our results attest that supply chain volatility can arise in the absence of exogenous oscillatory or random demand and suggest strategies for avoiding or minimizing such volatility.

Suggested Citation

  • Kim, Ilhyung & Springer, Mark, 2008. "Measuring endogenous supply chain volatility: Beyond the bullwhip effect," European Journal of Operational Research, Elsevier, vol. 189(1), pages 172-193, August.
    • Handle: RePEc:eee:ejores:v:189:y:2008:i:1:p:172-193
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377-2217(07)00470-5
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kim, Jeon G. & Chatfield, Dean & Harrison, Terry P. & Hayya, Jack C., 2006. "Quantifying the bullwhip effect in a supply chain with stochastic lead time," European Journal of Operational Research, Elsevier, vol. 173(2), pages 617-636, September.
    2. Julia Miyaoka & Warren Hausman, 2004. "How a Base Stock Policy Using "Stale" Forecasts Provides Supply Chain Benefits," Manufacturing & Service Operations Management, INFORMS, vol. 6(2), pages 149-162, September.
    3. Joel H. Steckel & Sunil Gupta & Anirvan Banerji, 2004. "Supply Chain Decision Making: Will Shorter Cycle Times and Shared Point-of-Sale Information Necessarily Help?," Management Science, INFORMS, vol. 50(4), pages 458-464, April.
    4. Gérard P. Cachon, 1999. "Managing Supply Chain Demand Variability with Scheduled Ordering Policies," Management Science, INFORMS, vol. 45(6), pages 843-856, June.
    5. 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.
    6. Anantaram Balakrishnan & Joseph Geunes & Michael S. Pangburn, 2004. "Coordinating Supply Chains by Controlling Upstream Variability Propagation," Manufacturing & Service Operations Management, INFORMS, vol. 6(2), pages 163-183, July.
    7. Carlos F. Daganzo, 2004. "On the Stability of Supply Chains," Operations Research, INFORMS, vol. 52(6), pages 909-921, December.
    8. Fangruo Chen & Rungson Samroengraja, 2004. "Order Volatility and Supply Chain Costs," Operations Research, INFORMS, vol. 52(5), pages 707-722, October.
    9. Dejonckheere, J. & Disney, S. M. & Lambrecht, M. R. & Towill, D. R., 2003. "Measuring and avoiding the bullwhip effect: A control theoretic approach," European Journal of Operational Research, Elsevier, vol. 147(3), pages 567-590, June.
    10. Kahn, James A, 1987. "Inventories and the Volatility of Production," American Economic Review, American Economic Association, vol. 77(4), pages 667-679, September.
    11. 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.
    12. Frank Chen & Zvi Drezner & Jennifer K. Ryan & David Simchi-Levi, 2000. "Quantifying the Bullwhip Effect in a Simple Supply Chain: The Impact of Forecasting, Lead Times, and Information," Management Science, INFORMS, vol. 46(3), pages 436-443, March.
    13. Hosoda, Takamichi & Disney, Stephen M., 2006. "On variance amplification in a three-echelon supply chain with minimum mean square error forecasting," Omega, Elsevier, vol. 34(4), pages 344-358, August.
    14. Dejonckheere, J. & Disney, S. M. & Lambrecht, M. R. & Towill, D. R., 2004. "The impact of information enrichment on the Bullwhip effect in supply chains: A control engineering perspective," European Journal of Operational Research, Elsevier, vol. 153(3), pages 727-750, March.
    15. Disney, S.M. & Farasyn, I. & Lambrecht, M. & Towill, D.R. & de Velde, W. Van, 2006. "Taming the bullwhip effect whilst watching customer service in a single supply chain echelon," European Journal of Operational Research, Elsevier, vol. 173(1), pages 151-172, August.
    16. 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.
    17. Rachel Croson & Karen Donohue, 2006. "Behavioral Causes of the Bullwhip Effect and the Observed Value of Inventory Information," Management Science, INFORMS, vol. 52(3), pages 323-336, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dejian Yu & Zhaoping Yan, 2021. "Knowledge diffusion of supply chain bullwhip effect: main path analysis and science mapping analysis," Scientometrics, Springer;Akadémiai Kiadó, vol. 126(10), pages 8491-8515, October.
    2. Ciancimino, Elena & Cannella, Salvatore & Bruccoleri, Manfredi & Framinan, Jose M., 2012. "On the Bullwhip Avoidance Phase: The Synchronised Supply Chain," European Journal of Operational Research, Elsevier, vol. 221(1), pages 49-63.
    3. Benjamin Nitsche, 2018. "Unravelling the Complexity of Supply Chain Volatility Management," Logistics, MDPI, vol. 2(3), pages 1-26, August.
    4. Chatfield, Dean C. & Pritchard, Alan M., 2013. "Returns and the bullwhip effect," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 49(1), pages 159-175.
    5. Lin, Junyi & Huang, Hongfu & Li, Shanshan & Naim, Mohamed M., 2023. "On the dynamics of order pipeline inventory in a nonlinear order-up-to system," International Journal of Production Economics, Elsevier, vol. 266(C).
    6. Springer, Mark & Kim, Ilhyung, 2010. "Managing the order pipeline to reduce supply chain volatility," European Journal of Operational Research, Elsevier, vol. 203(2), pages 380-392, June.
    7. Armenia, Stefano & Franco, Eduardo & Iandolo, Francesca & Maielli, Giuliano & Vito, Pietro, 2024. "Zooming in and out the landscape: Artificial intelligence and system dynamics in business and management," Technological Forecasting and Social Change, Elsevier, vol. 200(C).
    8. Ciancimino, Elena & Cannella, Salvatore & Canca Ortiz, José David & Framiñán Torres, José Manuel, 2009. "Análisis multinivel de cadenas de suministros: dos técnicas de resolución del efecto bullwhip // Supply Chain Multi-level Analysis: Two Bullwhip Dampening Approaches," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 8(1), pages 7-28, December.
    9. Yu, Dejian & Yan, Zhaoping, 2023. "Main path analysis considering citation structure and content: Case studies in different domains," Journal of Informetrics, Elsevier, vol. 17(1).

    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. Wang, Xun & Disney, Stephen M., 2016. "The bullwhip effect: Progress, trends and directions," European Journal of Operational Research, Elsevier, vol. 250(3), pages 691-701.
    2. Chatfield, Dean C. & Pritchard, Alan M., 2013. "Returns and the bullwhip effect," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 49(1), pages 159-175.
    3. 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.
    4. 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.
    5. Ciancimino, Elena & Cannella, Salvatore & Bruccoleri, Manfredi & Framinan, Jose M., 2012. "On the Bullwhip Avoidance Phase: The Synchronised Supply Chain," European Journal of Operational Research, Elsevier, vol. 221(1), pages 49-63.
    6. 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.
    7. Lai, Richard, 2005. "Bullwhip in a Spanish Shop," MPRA Paper 4758, University Library of Munich, Germany.
    8. Ponte, Borja & Costas, José & Puche, Julio & Pino, Raúl & de la Fuente, David, 2018. "The value of lead time reduction and stabilization: A comparison between traditional and collaborative supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 111(C), pages 165-185.
    9. Nepal, Bimal & Murat, Alper & Babu Chinnam, Ratna, 2012. "The bullwhip effect in capacitated supply chains with consideration for product life-cycle aspects," International Journal of Production Economics, Elsevier, vol. 136(2), pages 318-331.
    10. Li Chen & Hau L. Lee, 2012. "Bullwhip Effect Measurement and Its Implications," Operations Research, INFORMS, vol. 60(4), pages 771-784, August.
    11. 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.
    12. 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.
    13. 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.
    14. Zhu, Tianyuan & Balakrishnan, Jaydeep & da Silveira, Giovani J.C., 2020. "Bullwhip effect in the oil and gas supply chain: A multiple-case study," International Journal of Production Economics, Elsevier, vol. 224(C).
    15. Ahmed Shaban & Mohamed A. Shalaby & Giulio Di Gravio & Riccardo Patriarca, 2020. "Analysis of Variance Amplification and Service Level in a Supply Chain with Correlated Demand," Sustainability, MDPI, vol. 12(16), pages 1-27, August.
    16. 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.
    17. 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.
    18. Disney, S.M. & Farasyn, I. & Lambrecht, M. & Towill, D.R. & de Velde, W. Van, 2006. "Taming the bullwhip effect whilst watching customer service in a single supply chain echelon," European Journal of Operational Research, Elsevier, vol. 173(1), pages 151-172, August.
    19. Enrique Holgado de Frutos & Juan R Trapero & Francisco Ramos, 2020. "A literature review on operational decisions applied to collaborative supply chains," PLOS ONE, Public Library of Science, vol. 15(3), pages 1-28, March.
    20. Springer, Mark & Kim, Ilhyung, 2010. "Managing the order pipeline to reduce supply chain volatility," European Journal of Operational Research, Elsevier, vol. 203(2), pages 380-392, June.

    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:eee:ejores:v:189:y:2008:i:1:p:172-193. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    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.