Quantification of Supply Chain Bullwhip Effect

Abstract

The bullwhip effect occurs when orders made to suppliers have a bigger variation than sales to the buyer. This is a major concern that businesses are working on eliminating, as it has numerous side effects, such as excessive inventory, stock-outs, insufficient production, increased costs, etc. The new study adds to the literature by demonstrating how to quantify and assess the bullwhip impact in any supply chain. The results provided here illustrate that when consumer demand is unstable, the bullwhip effect is magnified. This result was achieved by using the proposed formula, which was based on an explanation and graph of the traditional bullwhip effect. A stochastic simulation based on a case study that replicates the behavior of a generic supply chain in a real-world market was used to evaluate the formula.