article

Bullwhip Effect Measurement and Its Implications

Authors:

Hau L. LeeAuthors Info & Claims

Operations Research, Volume 60, Issue 4

Pages 771 - 784

https://doi.org/10.1287/opre.1120.1074

Published: 01 July 2012 Publication History

Abstract

The bullwhip effect, or demand information distortion, has been a subject of both theoretical and empirical studies in the operations management literature. In this paper, we develop a simple set of formulas that describe the traditional bullwhip measure as a combined outcome of several important drivers, such as finite capacity, batch-ordering, and seasonality. Our modeling framework is descriptive in nature as it features certain plausible approximations that are commonly employed in practical inventory systems. The results are nonetheless compelling and can be used to explain various conflicting observations in previous empirical studies. Building on the theoretical framework, we discuss the managerial implications of the bullwhip measurement. We show that the measurement can be completely noninformative about the underlying supply chain cost performance if it is not linked to the operational details (such as decision intervals and leadtimes). Specifically, we show that an aggregated measurement over relatively long time periods can mask the operational-level bullwhip. In addition, we show that masking also exists under product or location aggregation in some illustrative cases.

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Cited By

Lee SPark SSeshadri S(2023)Variations of the Bullwhip Effect Across Foreign SubsidiariesManufacturing & Service Operations Management10.1287/msom.2022.113725:1(1-18)Online publication date: 1-Jan-2023
https://dl.acm.org/doi/10.1287/msom.2022.1137
Moritz BNarayanan AParker C(2022)Unraveling Behavioral OrderingManufacturing & Service Operations Management10.1287/msom.2021.103024:3(1733-1750)Online publication date: 1-May-2022
https://dl.acm.org/doi/10.1287/msom.2021.1030
Jaenichen FLiepold CIsmail AMartens CDörrsam VEhm H(2021)Simulating and evaluating supply chain disruptions along an end-to-end semiconductor automotive supply chainProceedings of the Winter Simulation Conference10.5555/3522802.3522933(1-12)Online publication date: 13-Dec-2021
https://dl.acm.org/doi/10.5555/3522802.3522933
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Published In

cover image Operations Research

Operations Research Volume 60, Issue 4

07-08 2012

281 pages

ISSN:0030-364X

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Publisher

INFORMS

Linthicum, MD, United States

Publication History

Published: 01 July 2012

Accepted: 01 March 2012

Received: 01 May 2010

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Cited By

Lee SPark SSeshadri S(2023)Variations of the Bullwhip Effect Across Foreign SubsidiariesManufacturing & Service Operations Management10.1287/msom.2022.113725:1(1-18)Online publication date: 1-Jan-2023
https://dl.acm.org/doi/10.1287/msom.2022.1137
Moritz BNarayanan AParker C(2022)Unraveling Behavioral OrderingManufacturing & Service Operations Management10.1287/msom.2021.103024:3(1733-1750)Online publication date: 1-May-2022
https://dl.acm.org/doi/10.1287/msom.2021.1030
Jaenichen FLiepold CIsmail AMartens CDörrsam VEhm H(2021)Simulating and evaluating supply chain disruptions along an end-to-end semiconductor automotive supply chainProceedings of the Winter Simulation Conference10.5555/3522802.3522933(1-12)Online publication date: 13-Dec-2021
https://dl.acm.org/doi/10.5555/3522802.3522933
Osadchiy NSchmidt WWu J(2021)The Bullwhip Effect in Supply NetworksManagement Science10.1287/mnsc.2020.382467:10(6153-6173)Online publication date: 1-Oct-2021
https://dl.acm.org/doi/10.1287/mnsc.2020.3824
Bray RYao YDuan YHuo J(2019)Ration Gaming and the Bullwhip EffectOperations Research10.1287/opre.2018.177467:2(453-467)Online publication date: 1-Mar-2019
https://dl.acm.org/doi/10.1287/opre.2018.1774
Paul DZhang AAsian S(2018)On the Value of Demand Management for Mitigating Risk: Peak-Order Reduction Through Trend Filtering2018 IEEE International Conference on Systems, Man, and Cybernetics (SMC)10.1109/SMC.2018.00388(2260-2265)Online publication date: 7-Oct-2018
https://dl.acm.org/doi/10.1109/SMC.2018.00388
Chen LSong JZhang Y(2017)Serial Inventory Systems with Markov-Modulated DemandOperations Research10.1287/opre.2017.161565:5(1231-1249)Online publication date: 1-Oct-2017
https://dl.acm.org/doi/10.1287/opre.2017.1615
Raghunathan STang CYue X(2017)Analysis of the Bullwhip Effect in a Multiproduct Setting with Interdependent DemandsOperations Research10.1287/opre.2016.157165:2(424-432)Online publication date: 1-Apr-2017
https://dl.acm.org/doi/10.1287/opre.2016.1571
Chen LLuo WShang K(2017)Measuring the Bullwhip EffectManufacturing & Service Operations Management10.1287/msom.2016.059019:1(36-51)Online publication date: 1-Feb-2017
https://dl.acm.org/doi/10.1287/msom.2016.0590
Kesavan SKushwaha TGaur V(2016)Do High and Low Inventory Turnover Retailers Respond Differently to Demand Shocks?Manufacturing & Service Operations Management10.1287/msom.2015.057118:2(198-215)Online publication date: 1-May-2016
https://dl.acm.org/doi/10.1287/msom.2015.0571
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