The Impact of Demand Correlation on Bullwhip Effect in a Two-stage Supply Chain with Two Retailers

Jianhua Ji, Huafeng Li, Jie Zhang, Cuicui Meng

2015

Abstract

In a two-stage supply chain with two retailers, if they have correlated customer demand, forecasting based on their respective history order might cause significant forecast inaccuracy. Current forecast methods only use supply chain members’ own history demand information. However, when there are multi-retailer’s having correlated demand, the common forecasting methods ignore the forecast error caused by retailers’ interaction. Then, a question comes up that what is the relation between this forecast error and the bullwhip effect. The present paper studies relation of multi-terminals’ demand correlation and bullwhip effect in a two-stage supply chain with two retailers. Under centralized or decentralized information, (1) the impact of retailers’ demand correlation on retailers’/supplier’s bullwhip effect is studied; (2) the contrast of supplier’s and retailers’ bullwhip effect and the contrast of supplier’s/ retailers’ bullwhip effect under different information sharing condition are studied. The studies show that multi-terminals’ demand correlation is a cause of supply chain’s bullwhip effect.

References

1. Chen, F., Drezner, Z., Ryan, J.K., and Simchi-Levi, D. (2000a), 'Quantifying the bullwhip effect in a simple supply chain', Management Science, 46 , 436-443.
2. Chen, F., Ryan, J.K., and Simchi -Levi, D. (2000), 'The impact of exponential smoothing forecasts on the bullwhip effect', Naval Research Logistics, 47, 269-286.
3. Heyman, D.P. and Sobel, M.J. (2003), Stochastic Models in Operations Research: Stochastic Optimization (Vol.2), New York: Courier Dover Publications.
4. Johnson, G.D. and Thompson, H.E. (1975), Optimality of myopic inventory policies for certain dependent demand processes, Management Science, 21, 1303-1307.
5. Lee H.L, Padmanabhan V. and Whang S. (1997), Information Distortion in a Supply Chain: The Bullwhip Effect, Management Science, 43, 546-558.
6. Lee, H.L ,So K.C. and Tang, C.S. (2000), The value of information sharing in a two-level supply chain, Management Science, 46, 626-643.
7. Li, G., Wang, S.Y. and Yu, G. (2006), A study on bullwhip effect and information sharing in supply chains, Changsha: Hunan University Press. (in Chinese).
8. Luong, H.T. (2007), Measure of Bullwhip Effect in Supply Chains With Autoregressive Demand Process, European Journal of Operational Research, 180, 1086-1097.
9. Luong, H.T. and Phien, N.H. (2007), Measure of Bullwhip Effect in Supply Chains-The case of high order Autoregressive Demand Process, European Journal of Operational Research, 183, 197-209.
10. Zhang, X.L. (2004), The impact of forecasting methods on the bullwhip effect, International Journal of Production Economics, 88, 15-27.

Paper Citation

in Harvard Style

Ji J., Li H., Zhang J. and Meng C. (2015). The Impact of Demand Correlation on Bullwhip Effect in a Two-stage Supply Chain with Two Retailers . In Proceedings of the International Conference on Operations Research and Enterprise Systems - Volume 1: ICORES, ISBN 978-989-758-075-8, pages 304-313. DOI: 10.5220/0005233003040313

in Bibtex Style

@conference{icores15,
author={Jianhua Ji and Huafeng Li and Jie Zhang and Cuicui Meng},
title={The Impact of Demand Correlation on Bullwhip Effect in a Two-stage Supply Chain with Two Retailers},
booktitle={Proceedings of the International Conference on Operations Research and Enterprise Systems - Volume 1: ICORES,},
year={2015},
pages={304-313},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0005233003040313},
isbn={978-989-758-075-8},
}

in EndNote Style

TY - CONF
JO - Proceedings of the International Conference on Operations Research and Enterprise Systems - Volume 1: ICORES,
TI - The Impact of Demand Correlation on Bullwhip Effect in a Two-stage Supply Chain with Two Retailers
SN - 978-989-758-075-8
AU - Ji J.
AU - Li H.
AU - Zhang J.
AU - Meng C.
PY - 2015
SP - 304
EP - 313
DO - 10.5220/0005233003040313