Impact of Price-Sensitive Demand and Premium Payment Scheme on Bullwhip Effect

Bullwhip effect reduces the efficiency, responsiveness, and value of the supply chain. There are some indirect causes like lead time, the number of echelons, and some direct causes of bullwhip effect such as rationing or price variation. Due to capacity constraints, retailers are forced to experience rationing of their demands. Fear of rationing usually gives rise to manipulable demand and hence increases the bullwhip effect. Moreover, if the retailer’s demand is price sensitive then it will cause price variation. The offerings of premium payment by retailers due to unfulfilled demand lure the supplier to extend his existing capacity and to allocate them more supply. In this paper, an attempt has been made to mitigate the impact of the bullwhip effect using a premium payment scheme. A technique has been coined that will help in reducing the bullwhip effect. The increased value of the supply chain on using a premium payment scheme is proof of the reduction of the bullwhip effect. Results are validated through numerical analysis.

Download Full-text

Analysis and Verification of Bullwhip Effect Based on System Dynamics

Applied Mechanics and Materials ◽

10.4028/www.scientific.net/amm.340.312 ◽

2013 ◽

Vol 340 ◽

pp. 312-319

Author(s):

Fu Xin Yang ◽

Bai Lan Zhang ◽

Zhi Yuan Su

Keyword(s):

Supply Chain ◽

System Dynamics ◽

Correlation Coefficient ◽

Lead Time ◽

Process Model ◽

Autoregressive Process ◽

Bullwhip Effect ◽

Simulation Software ◽

Simulation Results ◽

The Impact

To study the bullwhip effect (BWE) in supply chain (SC), this paper built two system dynamics (SD) models strictly referring to the AR(1) (autoregressive process) model constructed by Frank Chen. Using Vensim simulation software, it analyzed the impact of the correlation coefficient of demand, lead time, smoothing time of demand and information to BWE, and then put forward some proposals on how to reduce BWE. By contrasting the simulation results of SD models with the AR(1) models', it verifies the validity of the AR(1) model of Frank Chen from a simulation perspective. It also shows SD model combined with AR(1) model can analyze BWE in SC reliably and powerfully.

Download Full-text

The Impact of Lead-Time on Bullwhip Effect in Supply Chain

2008 ISECS International Colloquium on Computing, Communication, Control, and Management ◽

10.1109/cccm.2008.224 ◽

2008 ◽

Cited By ~ 3

Author(s):

Xiaojing Wang ◽

Zhixue Liu ◽

Changzheng Zheng ◽

Chunguang Quan

Keyword(s):

Supply Chain ◽

Lead Time ◽

Bullwhip Effect ◽

The Impact

Download Full-text

A Discrete Event Simulation Analysis of the Bullwhip Effect in a Multi-Product and Multi-Echelon Supply Chain of Fast Moving Consumer Goods

Pakistan Journal of Statistics and Operation Research ◽

10.18187/pjsor.v16i3.3088 ◽

2020 ◽

pp. 561-576

Author(s):

Ramsha Ali ◽

Ruzelan Khalid ◽

Shahzad Qaiser

Keyword(s):

Supply Chain ◽

Information Sharing ◽

Discrete Event Simulation ◽

Fast Moving ◽

Lead Time ◽

Discrete Event ◽

Bullwhip Effect ◽

Event Simulation ◽

Stochastic Lead Time ◽

The Impact

Timely delivery is the major issue in Fast Moving Consumer Good (FMCG) since it depends on the lead time which is stochastic and long due to several reasons; e.g., delay in processing orders and transportation. Stochastic lead time can cause inventory inaccuracy where echelons have to keep high product stocks. Such performance inefficiency reflects the existence of the bullwhip effect (BWE), which is a common challenge in supply chain networks. Thus, this paper studies the impact of stochastic lead time on the BWE in a multi-product and multi-echelon supply chain of FMCG industries under two information-sharing strategies; i.e., decentralized and centralized. The impact was measured using a discrete event simulation approach, where a simulation model of a four-tier supply chain whose echelons adopt the same lead time distribution and continuous review inventory policy was developed and simulated. Different lead time cases under the information-sharing strategies were experimented and the BWE was measured using the standard deviation of demand ratios between echelons. The results show that the BWE cannot be eliminated but can be reduced under centralized information sharing. All the research analyses help the practitioners in FMCG industries get insight into the impact of sharing demand information on the performance of a supply chain when lead time is stochastic.

Download Full-text

Modelling resilient fashion retail supply chain strategies to mitigate the COVID-19 impact

The International Journal of Logistics Management ◽

10.1108/ijlm-03-2021-0170 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

P.R.S. Sarma ◽

Aalok Kumar ◽

Nishat Alam Choudhary ◽

Sachin Kumar Mangla

Keyword(s):

Supply Chain ◽

Capacity Constraints ◽

Content Type ◽

Online Platforms ◽

Aspiration Levels ◽

The Future ◽

Optimisation Model ◽

Fashion Retail ◽

Online Stores ◽

The Impact

PurposeThis paper aims to develop supply chain strategies for the fashion retail supply chain (FRSC), likely to be disrupted by the current pandemic (COVID-19) under physical and online retail stores. The resilient retail supply chain design is proposed under budget allocation and merchandise capacity constraints.Design/methodology/approachThis paper utilises the theory of constraint (ToC) and goal programming (GP) to address the COVID-19 impact on FRSC. The budgetary and capacity constraints are formulated with a constraint optimisation model and tested with six different priorities to deal with the physical and online stores. Next, all priorities are developed under different FRSC business scenarios. The ToC-GP-based optimisation model is validated with one of the Indian fashion retail supply chains.FindingsThe proposed optimisation model presents the optimal retailing strategies for selling fashion goods over physical and online platforms. The multiple scenarios are presented for developing trade-offs among different strategies to maximise the retailer's merchandise performance. This paper also highlighted the strategic movement from high merchandise density stores to low merchandise density stores. This implies a reduction of sales targets and aspiration levels of both online and physical fashion stores.Research limitations/implicationsThe proposed model is validated with one of the fashion retailers in India. Other nations or multiple fashion retailers might be considered for more generalisation of findings in the future.Practical implicationsThis research helps fashion retail supply chain managers deal with consumer demand uncertainty over physical and online stores in pandemic times. Limitation: Other nations or multiple fashion retailers might be considered for more generalisation of findings in the future.Originality/valueThis is the first study that considered the impact of COVID-19 on the retail fashion supply chain. The effect of physical and online platforms is mainly discussed from consumer marketing perspectives, but an inventory and resilience perspective is missing in earlier studies. The role of merchandise planning is highlighted in this study.

Download Full-text

MODELING THE IMPACT OF PARTIAL INFORMATION SHARING IN A THREE-ECHELON SUPPLY CHAIN

Asia Pacific Journal of Operational Research ◽

10.1142/s0217595913500206 ◽

2013 ◽

Vol 30 (05) ◽

pp. 1350020 ◽

Cited By ~ 3

Author(s):

ZHUPING LIU ◽

QIUHONG ZHAO ◽

SHOUYANG WANG ◽

JIANMING SHI

Keyword(s):

Supply Chain ◽

Numerical Analysis ◽

Information Sharing ◽

Partial Information ◽

Autoregressive Coefficient ◽

The Impact

This paper investigates the impact of partial information sharing in a three-echelon supply chain. Partial information sharing means that information sharing occurs only between the distributor and the retailer, but not between the distributor and the manufacturer. This paper contributes to the literature by summarizing the circumstances in which information sharing between the retailer and the distributor benefits the manufacturer. In addition, our study points out that such information sharing does not always bring benefits to the manufacturer and that in some cases the information sharing may harm the manufacturer. We explain the reasons why this can happen and give managerial intuition for our results. Using numerical analysis, we illustrate the impact of partial information sharing on the agents in the supply chain with the change of the autoregressive coefficient in the demand process.

Download Full-text

A beer game simulation model for studying the impact of information sharing to diminish the bullwhip effect in supply chains: an educational support tool in supply chain management

Revista Gestão da Produção Operações e Sistemas ◽

10.15675/gepros.v11i2.1392 ◽

2016 ◽

Vol 11 (2) ◽

pp. 53-66

Author(s):

Éder Vasco Pinheiro ◽

Enzo Morosini Frazzon ◽

Leonardo Sgnaolin ◽

Luiz Henrique Souza Mendonça

Keyword(s):

Supply Chain ◽

Supply Chain Management ◽

Information Sharing ◽

Bullwhip Effect ◽

Educational Support ◽

Chain Management ◽

Support Tool ◽

Game Simulation ◽

The Impact ◽

Beer Game

Download Full-text

Investigating the impact of inventory inaccuracy on the bullwhip effect in RFID-enabled supply chains using colored petri nets

Journal of Modelling in Management ◽

10.1108/jm2-08-2017-0081 ◽

2019 ◽

Vol 14 (2) ◽

pp. 360-384 ◽

Cited By ~ 2

Author(s):

Maria Drakaki ◽

Panagiotis Tzionas

Keyword(s):

Supply Chain ◽

Supply Chains ◽

Petri Nets ◽

Information Sharing ◽

Bullwhip Effect ◽

Colored Petri Nets ◽

Content Type ◽

Multi Stage ◽

The Impact ◽

Serial Supply Chains

PurposeInformation distortion results in demand variance amplification in upstream supply chain members, known as the bullwhip effect, and inventory inaccuracy in the inventory records. As inventory inaccuracy contributes to the bullwhip effect, the purpose of this paper is to investigate the impact of inventory inaccuracy on the bullwhip effect in radio-frequency identification (RFID)-enabled supply chains and, in this context, to evaluate supply chain performance because of the RFID technology.Design/methodology/approachA simulation modeling method based on hierarchical timed colored petri nets is presented to model inventory management in multi-stage serial supply chains subject to inventory inaccuracy for various traditional and information sharing configurations in the presence and absence of RFID. Validation of the method is done by comparing results obtained for the bullwhip effect with published literature results.FindingsThe bullwhip effect is increased in RFID-enabled multi-stage serial supply chains subject to inventory inaccuracy. The information sharing supply chain is more sensitive to the impact of inventory inaccuracy.Research limitations/implicationsInformation sharing involves collaboration in market demand and inventory inaccuracy, whereas RFID is implemented by all echelons. To obtain the full benefits of RFID adoption and collaboration, different collaboration strategies should be investigated.Originality/valueColored petri nets simulation modeling of the inventory management process is a novel approach to study supply chain dynamics. In the context of inventory errors, information on RFID impact on the dynamic behavior of multi-stage serial supply chains is provided.

Download Full-text