Impacts of Order Cycle Time on the Bullwhip Effect: A Numerical Study

Abstract

The bullwhip effect phenomenon refers to the amplification of demand variability as movingaway from the end customers to the suppliers in a supply chain. This research is concerned with the impacts of order cycle time on the bullwhip effect by considering its four major causes, i.e., demand forecast, price fluctuation, anticipation of shortages, andorder batching. Considering a two-echelon supply chain, fournumerical examples are developed where a multi-period inventory system with a periodic review policy is used.In each order cycle, a replenishment is initiated to raise the inventory to the order-up-to level, and the variance ratio of the manufacturer order to the market demand is calculated. Our results show that order cycle time reduction could counterattack four major causes of the bullwhip effect at the same time.