Behavioral causes of the bullwhip effect: An analysis using linear control theory

Abstract

It has long been recognized that the bullwhip effect in real life depends on a behavioral component. However, non-experimental research typically considers only structural causes in its analysis. In this article, we study the impact of behavioral biases on the performance of inventory/production systems modeled through an APVIOBPCS (Automatic Pipeline, Variable Inventory, Order-Based Production Control System) design using linear control theory. To explicitly model managerial behavior, we allow independent adjustments to inventory and pipeline feedback loops. We consider the biases of smoothing/over-reaction to inventory and pipeline mismatches and the under-/over-estimation of the pipeline. To quantify the performance of the system, we first develop a new procedure to determine the exact stability region of the system and we derive an asymptotic stability region that is independent of the lead time. Afterwards, we analyze the effect of different demand signals on order and inventory variations. Our findings suggest that normative policy recommendations must take demand structure explicitly into account. Finally, through extensive numerical experiments, we find that the performance of the system depends on the combination of the behavioral biases and the structure of the demand stream.

Bullwhip effect attenuation in supply chain management via control-theoretic tools and short-term forecasts: A preliminary study with an application to perishable inventories

“…Thus y(t) = b k (t − L) + y(L), t ≥ L. Its absolute value | y(t) | becomes very large, at least from a purely mathematical standpoint, when t → +∞. This is a convincing illustration of the famous bullwhip effect to which a huge literature has been devoted (see, e.g., [19], [23], [45], [70], [76], [78], and the references therein).…”

Reducing the Bullwhip effect in a supply chain network by application of optimal control theory

“…During the past decade, some other authors have also proposed models studying the dynamics of supply chains by means of control theory and specially, optimal control principles (for instance see, Bemporad and Giorgetti [5], Buwalda et al [7], Fagunde and Facó [19], Zhang and Lv [71], Dong and Li [17], Sun et al [63], Miranbeigi et al [42], Udenio et al [66], and Pinho et al [49]). The current work presents a practical modeling approach to deal with the dynamics of the supply chains by the considerations of the cost and inventory level fluctuations.…”

Inventory and Production Dynamics in a Discrete-Time Vendor-Managed Inventory Supply Chain System

“…This question will be addressed in terms of stability. As investigated in the literature, stability is a fundamental problem for any dynamical system including supply chain systems [21,27,28]. After being disrupted, the state of a stable system will return to its steady state gradually.…”