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Impact of information sharing and lead time on bullwhip effect and on-hand inventory

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  • Agrawal, Sunil
  • Sengupta, Raghu Nandan
  • Shanker, Kripa

Abstract

This work analyzes a two echelon (warehouse-retailer) serial supply chain to study the impact of information sharing (IS) and lead time on bullwhip effect and on-hand inventory. The customer demand at the retailer is assumed to be an autoregressive (AR(1)) process. Both the echelons use a minimum mean squared error (MMSE) model for forecasting lead time demand (LTD), and follow an adaptive base-stock inventory policy to determine their respective order quantities. For the cases of without IS and inter as well as intra echelon IS, expressions for the bullwhip effect and on-hand inventory for the warehouse are obtained, considering deterministic lead-time. The results are compared with the previous research work and an easy analysis of the various bullwhip effect expressions under different scenarios, is done to understand the impact of IS on the bullwhip effect phenomenon. It is shown that some part of bullwhip effect will always remain even after sharing both inter as well as intra echelon information. Further, with the help of a numerical example it is shown that the lead time reduction is more beneficial in comparison to the sharing of information in terms of reduction in the bullwhip effect phenomenon.

Suggested Citation

  • Agrawal, Sunil & Sengupta, Raghu Nandan & Shanker, Kripa, 2009. "Impact of information sharing and lead time on bullwhip effect and on-hand inventory," European Journal of Operational Research, Elsevier, vol. 192(2), pages 576-593, January.
  • Handle: RePEc:eee:ejores:v:192:y:2009:i:2:p:576-593
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Lakhwinder Pal Singh & Ravi Teja Challa, 2016. "Integrated Forecasting Using the Discrete Wavelet Theory and Artificial Intelligence Techniques to Reduce the Bullwhip Effect in a Supply Chain," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 17(2), pages 157-169, June.
    2. Zhu, Xiaowei & Mukhopadhyay, Samar K. & Yue, Xiaohang, 2011. "Role of forecast effort on supply chain profitability under various information sharing scenarios," International Journal of Production Economics, Elsevier, vol. 129(2), pages 284-291, February.
    3. T. Saikouk & I. Zouaghi & A. Spalanzani, 2011. "Mitigating Supply Chain System Entropy by the Implementation of RFID," Post-Print halshs-00665653, HAL.
    4. 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.
    5. Cannella, Salvatore & Framinan, Jose M. & Bruccoleri, Manfredi & Barbosa-Póvoa, Ana Paula & Relvas, Susana, 2015. "The effect of Inventory Record Inaccuracy in Information Exchange Supply Chains," European Journal of Operational Research, Elsevier, vol. 243(1), pages 120-129.
    6. Sarac, Aysegul & Absi, Nabil & Dauzère-Pérès, Stéphane, 2010. "A literature review on the impact of RFID technologies on supply chain management," International Journal of Production Economics, Elsevier, vol. 128(1), pages 77-95, November.
    7. Lam, H.Y. & Choy, K.L. & Ho, G.T.S. & Cheng, Stephen W.Y. & Lee, C.K.M., 2015. "A knowledge-based logistics operations planning system for mitigating risk in warehouse order fulfillment," International Journal of Production Economics, Elsevier, vol. 170(PC), pages 763-779.
    8. Bandaly, Dia & Satir, Ahmet & Shanker, Latha, 2016. "Impact of lead time variability in supply chain risk management," International Journal of Production Economics, Elsevier, vol. 180(C), pages 88-100.
    9. 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.
    10. 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.
    11. Babai, M.Z. & Boylan, J.E. & Syntetos, A.A. & Ali, M.M., 2016. "Reduction of the value of information sharing as demand becomes strongly auto-correlated," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 130-135.
    12. Warren Liao, T. & Chang, P.C., 2010. "Impacts of forecast, inventory policy, and lead time on supply chain inventory--A numerical study," International Journal of Production Economics, Elsevier, vol. 128(2), pages 527-537, December.
    13. Yasser A. Davizón & César Martínez-Olvera & Rogelio Soto & Carlos Hinojosa & Piero Espino-Román, 2015. "Optimal Control Approaches to the Aggregate Production Planning Problem," Sustainability, MDPI, Open Access Journal, vol. 7(12), pages 1-16, December.
    14. 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.
    15. repec:gam:jsusta:v:7:y:2015:i:12:p:16324-16339:d:60355 is not listed on IDEAS
    16. Sabitha, Devarajulu & Rajendran, Chandrasekharan & Kalpakam, S. & Ziegler, Hans, 2016. "The value of information sharing in a serial supply chain with AR(1) demand and non-zero replenishment lead times," European Journal of Operational Research, Elsevier, vol. 255(3), pages 758-777.
    17. Zbigniew Michna & Peter Nielsen, 2013. "The impact of lead time forecasting on the bullwhip effect," Papers 1309.7374, arXiv.org, revised Jul 2015.
    18. Emerson, Denise & Zhou, Wei & Piramuthu, Selwyn, 2009. "Goodwill, inventory penalty, and adaptive supply chain management," European Journal of Operational Research, Elsevier, vol. 199(1), pages 130-138, November.
    19. 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.

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