Quantitative analysis for measuring and suppressing bullwhip effect
DOI:
https://doi.org/10.2298/YJOR161211019JKeywords:
Supply chain, Bullwhip effect, Allocation mechanism, Product Fill Rate (PFR)Abstract
The increasing competition in the market generally leads to uctuations in the products demand. Such uctuations pose a serious concern for the decision maker at each stage of the supply chain. Moreover, the capacity constraint at any level of the supply chain would make the situation more critical by elevating the bullwhip effect. The present article introduces a new allocation mechanism, i.e. Iterative Proportional Allocation (IPA), which instead of elevating, discourages the bullwhip effect. A comparative analysis of the proposed allocation mechanism with the policies defined in Jaggi et. al(2010) has been provided to explain the bottlenecks of existing policies. It has been established numerically, that application of IPA is beneficial for both retailers as well as suppliers, as the combined profit (loss) of all the retailers increases (decreases) and subsequently, minimizes the bullwhip effect of the supplier. We have incorporated the concept of Product Fill Rate (PFR) through which it is shown that IPA gives better results as compared to other allocation mechanisms.References
Cachon, G. P., & Lariviere, M. A., "Capacity choice and allocation: Strategic behavior and supply chain performance", Management Science, 45 (8) (1999) 1091-1108.
Cachon, G. P., & Lariviere, M. A., "An equilibrium analysis of linear and proportional allocation of scarce capacity", IIE Transactions, 31 (9) (1999) 835-849.
Cachon, G. P., Randall, T., & Schmidt, G. M., "In search of the bullwhip effect", Manufacturing & Service Operations Management, 9 (4) (2007) 457-479.
Chatfield, D. C., & Pritchard, A. M., "Returns and the bullwhip effect", Transportation Research Part E, 49 (2013) 159-175.
Chen, L., & Lee, H. L., "Bullwhip effect measurement and its implications", Operations Research, 60 (2012) 771-784.
Chopra, S., and Meindl, P., Supply Chain Management: Strategy, Planning and Operation, Upper Saddle River, Pearson Prentice Hall, New Jersey, 2001.
Dai, J., Peng, S., & Li, S., "Mitigation of Bullwhip Effect in Supply Chain Inventory Management Model", Procedia Engineering, 174 (2017) 1229-1234.
Dejonckheere, J., Disney, S. M., Lambrecht, M. R., & Towill, D. R., "Measuring and avoiding the bullwhip effect: A control theoretic approach", European Journal of Operational Research, 147 (3) (2003) 567-590.
Deshpande, V., & Schwarz, L. B., "Optimal capacity choice and allocation in decentralized supply chains", Working paper, Krannert School of Management, Purdue University, West Lafayette, Indiana, USA, 2002.
Forrester, J. W., Industrial Dynamics, Cambridge M.A., MIT Press, Cambridge, 1961.
Jaggi, C. K., Aggarwal, K. K., & Verma, M., "Allocation Game in a Single Period Supply Chain Model", Revista Investigacion Operacional, 31 (3) (2010) 258-267.
Kaplan, A., "Stock Rationing", IIE Management Science, 15 (5) (1969) 260-267.
Lee, H., Padmanabhan, P., & Whang, S., "The Bullwhip Effect in Supply Chains", Sloan Management Review, 38 (1997 (a)).
Lee, H., Padmanabhan, P., & Whang, S., "Information distortion in a supply chain: The bullwhip effect", Management Science, 43 (1997 (b)) 546-558.
Nahmias, S., & Demmy, W. S., "Operating Characteristics of an Inventory System with Rationing", Management Science, 27 (11) (1981) 1236-1245.
Nemtajela, N., & Mbohwa, C., "Relationship between inventory management and uncertain demand for fast moving consumer goods organisations", 14th Global Conference on Sustainable Manufacturing, GCSM, 3-5 October 2016, Stellenbosch, South Africa, 2016.
Ravindran, A., Multiple Criteria Decision Making in Supply Chain Management, CRC Press, Taylor and Francis Group.
Downloads
Published
Issue
Section
License
Copyright (c) 2018 YUJOR
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
