Impact of information sharing and lead time on bullwhip effect and on-hand inventory
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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hau L. Lee & Kut C. So & Christopher S. Tang, 2000. "The Value of Information Sharing in a Two-Level Supply Chain," Management Science, INFORMS, vol. 46(5), pages 626-643, May.
- So, Kut C. & Zheng, Xiaona, 2003. "Impact of supplier's lead time and forecast demand updating on retailer's order quantity variability in a two-level supply chain," International Journal of Production Economics, Elsevier, vol. 86(2), pages 169-179, November.
- Disney, S. M. & Towill, D. R., 2003. "On the bullwhip and inventory variance produced by an ordering policy," Omega, Elsevier, vol. 31(3), pages 157-167, June.
- 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.
- Edward Ignall & Arthur F. Veinott, Jr., 1969. "Optimality of Myopic Inventory Policies for Several Substitute Products," Management Science, INFORMS, vol. 15(5), pages 284-304, January.
- Srinivasan Raghunathan, 2001. "Information Sharing in a Supply Chain: A Note on its Value when Demand Is Nonstationary," Management Science, INFORMS, vol. 47(4), pages 605-610, April.
- Stephen C. Graves, 1999. "Addendum to "A Single-Item Inventory Model for a Nonstationary Demand Process"," Manufacturing & Service Operations Management, INFORMS, vol. 1(2), pages 174-174.
- Disney, S. M. & Towill, D. R. & van de Velde, W., 2004. "Variance amplification and the golden ratio in production and inventory control," International Journal of Production Economics, Elsevier, vol. 90(3), pages 295-309, August.
- 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.
- Kenneth Gilbert, 2005. "An ARIMA Supply Chain Model," Management Science, INFORMS, vol. 51(2), pages 305-310, February.
- Zhang, Xiaolong, 2004. "The impact of forecasting methods on the bullwhip effect," International Journal of Production Economics, Elsevier, vol. 88(1), pages 15-27, March.
- Raghunathan, Srinivasan, 2003. "Impact of demand correlation on the value of and incentives for information sharing in a supply chain," European Journal of Operational Research, Elsevier, vol. 146(3), pages 634-649, May.
- 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.
- Srinagesh Gavirneni & Roman Kapuscinski & Sridhar Tayur, 1999. "Value of Information in Capacitated Supply Chains," Management Science, INFORMS, vol. 45(1), pages 16-24, January.
- G. D. Johnson & H. E. Thompson, 1975. "Optimality of Myopic Inventory Policies for Certain Dependent Demand Processes," Management Science, INFORMS, vol. 21(11), pages 1303-1307, July.
When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:192:y:2009:i:2:p:576-593. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.