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Effect of the third-party warehouse on bullwhip effect and inventory cost in supply chains

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  • Ton Hien Duc, Truong
  • Luong, Huynh Trung
  • Kim, Yeong-Dae

Abstract

In this research, we examine the impact of a third-party warehouse on the bullwhip effect in a three-stage supply chain with one supplier, one third-party warehouse and two retailers. We compare the bullwhip effect in this three-stage supply chain and that in a two-stage supply chain with only one supplier and two retailers. It is assumed that the demand process can be modeled with an AR(1) model and the base stock inventory policy is employed for both the third-party warehouse in the three-stage system and the two retailers in the two-stage system. It is found that the existence of the third-party warehouse has no influence on bullwhip effect when the lead times of the third-party warehouse and the two retailers are equal. For cases in which the third-party warehouse does not have any impact on bullwhip effect, we examine the impact of the third-party warehouse on the inventory cost in the supply chain by analyzing inventory cost savings obtained by the existence of the warehouse.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:proeco:v:124:y:2010:i:2:p:395-407
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    2. 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.
    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. Junhai Ma & Xiaogang Ma, 2017. "Measure of the bullwhip effect considering the market competition between two retailers," International Journal of Production Research, Taylor & Francis Journals, vol. 55(2), pages 313-326, January.
    5. Junhai Ma & Jing Zhang & Liqing Zhu, 2018. "Study of the Bullwhip Effect under Various Forecasting Methods in Electronics Supply Chain with Dual Retailers considering Market Share," Complexity, Hindawi, vol. 2018, pages 1-19, January.

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