Analysis of the bullwhip effect with order batching in multi‐echelon supply chains

Abstract

Purpose -The purpose of this paper is to analyze the effect of batching on bullwhip effect in a model of multi-echelon supply chain with information sharing. Design/methodology/approach -The model uses the system dynamics and control theoretic concepts of variables, flows, and feedback processes and is implemented using iThink w software. Findings -It has been seen that the relationship between batch size and demand amplification is non-monotonic. Large batch sizes, when combined in integer multiples, can produce order rates that are close to the actual demand and produce little demand amplification, i.e. it is the size of the remainder of the quotient that is the determinant. It is further noted that the value of information sharing is greatest for smaller batch sizes, for which there is a much greater improvement in the amplification ratio.Research limitations/implications -Batching is associated with the inventory holding and backlog cost. Therefore, future work should investigate the cost implications of order batching in multi-echelon supply chains. Practical implications -This is a contribution to the continuing research into the bullwhip effect, giving supply chain operations managers and designers a practical way into controlling the bullwhip produced by batching across multi-echelon supply chains. Economies of scale processes usually favor large batch sizes. Reducing batch size in order to reduce the demand amplification is not a good solution. Originality/value -Previous similar studies have used control theoretic techniques and it has been pointed out that control theorists are unable to solve the lot sizing problem. Therefore, system dynamic simulation is then applied to investigate the impact of various batch sizes on bullwhip effect.

Analyzing the Relationship between Batch Sizing and Bullwhip Effect in Two-tier Supply Chain: A Case Study of Selected Pakistan Rice Firms

“…This research supports the research conducted by Hussain and Drake (2011) in a way that the smallest batch size does not lead to lower amplification. It is also conformity with the findings of (Riddalls and Bennett 2001;Potter and Disney 2006).…”

“…Firstly, it provides an empirical testing of a conceptual study by Hussain and Drake (2011), which analysed the relationship between batch size and the bullwhip effect as non-monotonic and that the size of remainder of quotient determines the value of bullwhip effect. Thus far, there has been no empirical evidence available related to the impact of batch sizing on the bullwhip effect in the existing literature.…”

“…In the current research, the following equation has been used to calculate the bullwhip effect. This equation is mostly used in literature (e.g., Muramatsu et al 1985;Disney and Towill, 2003b;Bottani and Montanari, 2010;Hussain and Drake, 2011). …”

Current economic downturn and supply chain: the significance of demand and inventory smoothing

“…A notorious family of smoothing replenishment policies is the inventory and order-based production control system (Towill 1982;John et al 1994). Recently, the benefit of this policy has been shown through theoretical studies (Boute et al 2007;Wright and Yuan 2008;Papanagnou and Halikias 2008;Chen and Lee 2009;Zhou et al 2010;Hussain and Drake 2011;Adenso-Diaz et al 2012), as well as empirical researches (Dooley et al 2010;Potter and Disney 2010). However, as we mentioned in Section 1, most of this studies do not consider the impact of this order policy on the customer service level of the supply chain partners.…”

Robust H$\infty $ control for chaotic supply chain networks

“…It has been indicated that the bullwhip effect [17] (the magnification of demand variability as orders move up the supply chain) is the culprit behind chaos in inventory levels and production strategies [18]. The negative impacts of the bullwhip effect can be summed up as surplus or short capacities, inadequate customer service, excess inventories, and high inventory costs [18,19]. Therefore, controlling chaos in the SCN is crucial and requires extensive research.…”