IDEAS home Printed from https://ideas.repec.org/p/msm/wpaper/2011-32.html
   My bibliography  Save this paper

Demand Variability in Supply Chains: The Influence of Global developments and Globalization on the Local Dutch Steel Industry

Author

Listed:
  • Herman de Kwaatsteniet

    (Maastricht School of Management, the Netherlands)

Abstract

For many decades the steel industry has developed on a slow but steady pace. Since 2004 the developing economies in Eastern Europe, Asia and South America radically influenced this situation. The growth in these regions was an important cause of shortages in raw material and resulting price fluctuations. Other aspects were improved logistics, speculation and the creation of global multinationals in the steel and mining industries. The local Dutch steel market evolved differently. In recent years, the market volume has shown a slow but steady decline as a result of economic, social and demographic factors as well as outsourcing and off shoring. As a result, local competition increased, causing pressure on operational margins and increasing financial risks. The current increased demand variability has a negative impact on these effects. This study aims to identify the causes and the consequences of the variability in demand that has been experienced by the Dutch steel sector. The study focuses on steel sheets and sections (beams); products which are used in different markets. Steel construction companies (SCCs) purchase steel sections for uniquely designed building projects. Steel sheet processing companies (SSPCs) are process orientated and supply a wide range of industries, often on the basis of medium term contracts. This orientation provides them with the options to hold stocks, in sharp contracts to steel companies operating in the construction sector. Second, this study aims to find solutions for the supply chain to mitigate the negative consequences of demand fluctuations. Secondary company data was analyzed to establish to what extent variability of demand in the Dutch supply chain of steel sheets and sections exists. By using a survey, the consequences for the Dutch steel sector were quantified for SCCs and SSPCs. The study identified the causes of the variability of demand by conducting a survey among a group of SCCs and SSPCs and by comparing demand data to both local and global market indicators. Finally, possible solutions were discussed with steel processors by means op in-depth unstructured interviews. The study confirms that different echelons in the supply chain inflict different levels of demand variability on their upstream suppliers. SCCs and SSPCs increase variability demand significantly, while steel distributors facilitate a smoother demand pattern for steel mills, a phenomenon known as the reversed bullwhip effect. The most important factor that influences the level of variability of demand is (expected) price fluctuations, followed by batch ordering. Price fluctuations are identified to be largely dependent on global factors. To a lesser extent they are related to local economic development. Therefore we can conclude a direct influence of global developments and globalisation on the local Dutch stele sector exists.

Suggested Citation

  • Herman de Kwaatsteniet, 2011. "Demand Variability in Supply Chains: The Influence of Global developments and Globalization on the Local Dutch Steel Industry," Working Papers 2011/32, Maastricht School of Management.
    • Handle: RePEc:msm:wpaper:2011/32
    as

    Download full text from publisher

    File URL: http://web2.msm.nl/RePEc/msm/wpaper/MSM-WP2011-32.pdf
    File Function: First version, 2011
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jan Dehn, 2000. "Commodity price uncertainty and shocks: implications for economic growth," CSAE Working Paper Series 2000-10, Centre for the Study of African Economies, University of Oxford.
    2. Beckerman, Wilfred & Jenkinson, Tim, 1986. "What Stopped the Inflation? Unemployment of Commodity Prices?," Economic Journal, Royal Economic Society, vol. 96(381), pages 39-54, March.
    3. Walter C. Labys & Alfred Maizels, 1990. "Commodity Price Fluctuations and Macro-economic Adjustments in the Developed Countries," WIDER Working Paper Series wp-1990-088, World Institute for Development Economic Research (UNU-WIDER).
    4. Boute, Robert N. & Disney, Stephen M. & Lambrecht, Marc R. & Van Houdt, Benny, 2007. "An integrated production and inventory model to dampen upstream demand variability in the supply chain," European Journal of Operational Research, Elsevier, vol. 178(1), pages 121-142, April.
    5. Özalp Özer & Wei Wei, 2006. "Strategic Commitments for an Optimal Capacity Decision Under Asymmetric Forecast Information," Management Science, INFORMS, vol. 52(8), pages 1238-1257, August.
    6. Blanchard, Olivier J, 1983. "The Production and Inventory Behavior of the American Automobile Industry," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 365-400, June.
    7. Van Duyne, Carl, 1979. "The macroeconomic effects of commodity market disruptions in open economies," Journal of International Economics, Elsevier, vol. 9(4), pages 559-582, November.
    8. Gérard P. Cachon, 1999. "Managing Supply Chain Demand Variability with Scheduled Ordering Policies," Management Science, INFORMS, vol. 45(6), pages 843-856, June.
    9. 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.
    10. Carone, Giuseppe & Denis, Cécile & Mc Morrow, Kieran & Mourre, Gilles & Röger, Werner, 2006. "Long-term labour productivity and GDP projections for the EU25 Member States : a production function framework," MPRA Paper 744, University Library of Munich, Germany.
    11. 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.
    12. Maizels, Alfred, 1987. "Commodities in crisis: An overview of the main issues," World Development, Elsevier, vol. 15(5), pages 537-549, May.
    13. Jan Dehn, 2000. "Commodity Price Uncertainty and Shocks: Implications for Economic Growth," Economics Series Working Papers WPS/2000-10, University of Oxford, Department of Economics.
    14. Maurice E. Schweitzer & Gérard P. Cachon, 2000. "Decision Bias in the Newsvendor Problem with a Known Demand Distribution: Experimental Evidence," Management Science, INFORMS, vol. 46(3), pages 404-420, March.
    15. 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.
    16. Labys, Walter C. & Maizels, Alfred, 1990. "Commodity Price Fluctuations and Macro-economic Adjustments in the Developed Countries," WIDER Working Papers 295623, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
    17. 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. 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. Li Chen & Hau L. Lee, 2012. "Bullwhip Effect Measurement and Its Implications," Operations Research, INFORMS, vol. 60(4), pages 771-784, August.
    3. Pastore, Erica & Alfieri, Arianna & Zotteri, Giulio, 2019. "An empirical investigation on the antecedents of the bullwhip effect: Evidence from the spare parts industry," International Journal of Production Economics, Elsevier, vol. 209(C), pages 121-133.
    4. Marshall Fisher, 2007. "Strengthening the Empirical Base of Operations Management," Manufacturing & Service Operations Management, INFORMS, vol. 9(4), pages 368-382, December.
    5. 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.
    6. 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.
    7. Cantor, David E. & Katok, Elena, 2012. "Production smoothing in a serial supply chain: A laboratory investigation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(4), pages 781-794.
    8. 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.
    9. Anupam Keshari & Nishikant Mishra & Nagesh Shukla & Steve McGuire & Sangeeta Khorana, 2018. "Multiple order-up-to policy for mitigating bullwhip effect in supply chain network," Annals of Operations Research, Springer, vol. 269(1), pages 361-386, October.
    10. Özalp Özer & Yanchong Zheng & Yufei Ren, 2014. "Trust, Trustworthiness, and Information Sharing in Supply Chains Bridging China and the United States," Management Science, INFORMS, vol. 60(10), pages 2435-2460, October.
    11. Walter C. Labys & Alfred Maizels, 1990. "Commodity Price Fluctuations and Macro-economic Adjustments in the Developed Countries," WIDER Working Paper Series wp-1990-088, World Institute for Development Economic Research (UNU-WIDER).
    12. Lai, Richard, 2005. "Bullwhip in a Spanish Shop," MPRA Paper 4758, University Library of Munich, Germany.
    13. Gérard P. Cachon, 2012. "What Is Interesting in Operations Management?," Manufacturing & Service Operations Management, INFORMS, vol. 14(2), pages 166-169, April.
    14. 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.
    15. Aharon, Ben-Tal & Boaz, Golany & Shimrit, Shtern, 2009. "Robust multi-echelon multi-period inventory control," European Journal of Operational Research, Elsevier, vol. 199(3), pages 922-935, December.
    16. 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.
    17. Zhang, Xiaolong & Burke, Gerard J., 2011. "Analysis of compound bullwhip effect causes," European Journal of Operational Research, Elsevier, vol. 210(3), pages 514-526, May.
    18. Arunachalam Narayanan & Brent B. Moritz, 2015. "Decision Making and Cognition in Multi-Echelon Supply Chains: An Experimental Study," Production and Operations Management, Production and Operations Management Society, vol. 24(8), pages 1216-1234, August.
    19. Xuanming Su, 2008. "Bounded Rationality in Newsvendor Models," Manufacturing & Service Operations Management, INFORMS, vol. 10(4), pages 566-589, May.
    20. U Benzion & Y Cohen & R Peled & T Shavit, 2008. "Decision-making and the newsvendor problem: an experimental study," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(9), pages 1281-1287, September.

    More about this item

    JEL classification:

    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    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:msm:wpaper:2011/32. 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: Maud de By (email available below). General contact details of provider: https://edirc.repec.org/data/msmmmnl.html .

    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.