Finance

Supply chain

Geology

Business

Bullwhip effect

Demand forecasting

Mathematics

Operations research

Geomorphology

Marketing

Order (exchange)

Economics

Microeconomics

Operations management

Lead (geology)

Computer science

Lead time

Industrial organization

Supply chain management

Management Science

An important observation in supply chain management, known as the bullwhip effect, suggests that demand variability increases as one moves up a supply chain. In this paper we quantify this effect for simple, two-stage supply chains consisting of a single retailer and a single manufacturer. Our model includes two of the factors commonly assumed to cause the bullwhip effect: demand forecasting and order lead times. We extend these results to multiple-stage supply chains with and without centralized customer demand information and demonstrate that the bullwhip effect can be reduced, but not completely eliminated, by centralizing demand information.

Quantifying the Bullwhip Effect in a Simple Supply Chain: The Impact of Forecasting, Lead Times, and Information