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Quantifying the Bullwhip Effect in a Simple Supply Chain: The Impact of Forecasting, Lead Times, and Information

Frank Chen, Zvi Drezner, Jennifer K. Ryan and David Simchi-Levi
Management Science
Vol. 46, No. 3 (Mar., 2000), pp. 436-443
Published by: INFORMS
Stable URL: http://www.jstor.org/stable/2634741
Page Count: 8
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Quantifying the Bullwhip Effect in a Simple Supply Chain: The Impact of Forecasting, Lead Times, and Information
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Abstract

An important observation in supply chain management, known as the bullwhip effect, suggests that demand variability increases as one moves up a supply chain. In this paper we quantify this effect for simple, two-stage supply chains consisting of a single retailer and a single manufacturer. Our model includes two of the factors commonly assumed to cause the bullwhip effect: demand forecasting and order lead times. We extend these results to multiple-stage supply chains with and without centralized customer demand information and demonstrate that the bullwhip effect can be reduced, but not completely eliminated, by centralizing demand information.

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