The effect of information sharing on supply chain stability and the bullwhip effect

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Abstract

This paper analyzes the bullwhip effect in multi-stage supply chains operated with linear and time-invariant inventory management policies and shared supply chain information. Such information includes past order sequences and inventory records at all supplier stages. The paper characterizes the stream of orders placed at any stage of the chain when the customer demand process is known and ergodic, and gives an exact formula for the variance of the orders placed. The paper also derives robust analytical conditions, based only on inventory management policies, to predict the presence of the bullwhip effect and bound its magnitude. These results hold independently of the customer demand. The general framework proposed in this paper allows for any inventory replenishment policies, any ways of sharing and utilizing information, and any customer demand processes. It is also shown as a special case that sharing customer demand information across the chain significantly reduces, but does not completely eliminate, the bullwhip effect.

Original languageEnglish (US)
Pages (from-to)1107-1121
Number of pages15
JournalEuropean Journal of Operational Research
Volume182
Issue number3
DOIs
StatePublished - Nov 1 2007

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Keywords

  • Frequency domain analysis
  • Information sharing
  • Stability
  • Supply chain management
  • The bullwhip effect

ASJC Scopus subject areas

  • Computer Science(all)
  • Modeling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

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