The Bullwhip Effect

Project Director:   Roger D. H. Warburton, University of Massachusetts, Dartmouth
                               and Griffin Manufacturing, Fall River, Ma
Contributors:      
    Jonathan P. E. Hodgson, St. Joseph’s University

    Yong K. Kim, University of Massachusetts, Dartmouth.

 

GOALS

Companies attempt to minimize inventory while maintaining sufficient to guard against fluctuations in demand. We have found new, exact analytical solutions to the full set of supply chain equations, opening up a whole new range of research opportunities. We intend to use these new solutions to develop optimal ordering policies that reduce the Bullwhip Effect, and generally improve inventory management. The goals of the research are:
  1.  To advance the mathematical understanding of the new solutions, both theoretically and through numerical integrations.
  2.  To broaden the set of solutions to cover a wide range of textile and apparel inventory problems.
  3.  To produce algorithms, heuristics, and guidelines for improving inventory management software systems.

 

ABSTRACT

The bullwhip effect is a well-established, frequent, and expensive occurrence: modest fluctuations in consumer demand are dramatically amplified as they proceed up the supply chain from retailer to apparel manufacturer to textile manufacturer. The Bullwhip Effect is a significant problem in wide variety of companies and industries. We have used our new solutions to the supply chain equations to develop optimal ordering policies that reduce the Bullwhip Effect, and generally improve inventory management. A surge in demand depletes inventory, and we have determined the critical parameters that replenish the inventory without any overshoot. This is a valuable tool, because retailers and manufacturers can adjust their orders to return their inventories to the desired level. Managerially useful ordering strategies have emerged from the mathematics. For example, the theoretical solutions allow us to eliminate long-term inventory deficits.

 

We have exactly solved the supply chain equations, and calibrated the Bullwhip Effect.



For further information:

NTC Project Annual Report, 2004



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