The impact of inventory sharing on the bullwhip effect in decentralized inventory systems

The paper derives the impact of inventory sharing policy on the bullwhip effect in two-stage supply chains with two independent suppliers and two integrated retailers. There exists an inventory sharing policy between two retailers. Under inventory sharing policy, when demand in one retailer exceeds its inventory, this retailer can ask for a product sharing volume from the other in order to satisfy customer demand. With certain assumptions, the bullwhip effect is quantified in both cases, with inventory sharing policy and without inventory sharing policy. We found that inventory sharing has significant impact on the bullwhip effect in the supply system. However, inventory sharing policy does not synchronously reduce or increase the bullwhip effect in both suppliers in the same period. A numerical example is given to illustrate the study model.

[1]  Kut C. So,et al.  Impact of supplier's lead time and forecast demand updating on retailer's order quantity variability in a two-level supply chain , 2003 .

[2]  Huynh Trung Luong,et al.  Measure of bullwhip effect in supply chains with autoregressive demand process , 2007, Eur. J. Oper. Res..

[3]  Yeong-Dae Kim,et al.  A measure of bullwhip effect in supply chains with a mixed autoregressive-moving average demand process , 2008, Eur. J. Oper. Res..

[4]  H.X. Sun,et al.  The impact of forecasting methods on bullwhip effect in supply chain management , 2005, Proceedings. 2005 IEEE International Engineering Management Conference, 2005..

[5]  J. Forrester.  Industrial Dynamics: A Major Breakthrough for Decision Makers , 2012 .

[6]  Ram Akella,et al.  Single-Period Multiproduct Inventory Models with Substitution , 1999, Oper. Res..

[7]  George Tagaras,et al.  Effects of pooling on the optimization and service levels of two-location inventory systems , 1989 .

[8]  Hui Zhao,et al.  Inventory Sharing and Rationing in Decentralized Dealer Networks , 2005, Manag. Sci..

[9]  Jafar Heydari,et al.  A study of lead time variation impact on supply chain performance , 2009 .

[10]  Itir Z. Karaesmen,et al.  Overbooking with Substitutable Inventory Classes , 2004, Oper. Res..

[11]  Erhan Kutanoglu,et al.  An inventory sharing and allocation method for a multi-location service parts logistics network with time-based service levels , 2009, Eur. J. Oper. Res..

[12]  Frank Y. Chen,et al.  Quantifying the Bullwhip Effect in a Simple Supply Chain: The Impact of Forecasting, Lead Times, and Information.: The Impact of Forecasting, Lead Times, and Information. , 2000 .

[13]  D. Simchi-Levi,et al.  The impact of exponential smoothing forecasts on the bullwhip effect , 2000 .

[14]  Stephen C. Graves,et al.  A Single-Item Inventory Model for a Nonstationary Demand Process , 1999, Manuf. Serv. Oper. Manag..

[15]  Nils Rudi,et al.  A Two-Location Inventory Model with Transshipment and Local Decision Making , 2001, Manag. Sci..

[16]  Philip T. Evers,et al.  Heuristics for assessing emergency transshipments , 2001, Eur. J. Oper. Res..

[17]  Gabriel R. Bitran,et al.  Ordering Policies in an environment of Stochastic Yields and Substitutable Demands , 1992, Oper. Res..

[18]  E. Silver,et al.  Some Concepts For Inventory Control Under Substitutable Demand , 1978 .

[19]  Kenneth Gilbert,et al.  An ARIMA Supply Chain Model , 2005, Manag. Sci..

[20]  Xiaolong Zhang.  The impact of forecasting methods on the bullwhip effect , 2004 .

[21]  Yan Dong,et al.  TOWARDS BETTER COORDINATION OF THE SUPPLY CHAIN , 2001 .

[22]  Terry P. Harrison,et al.  Quantifying the bullwhip effect in a supply chain with stochastic lead time , 2006, Eur. J. Oper. Res..

[23]  Terry P. Harrison,et al.  The Bullwhip Effect—Impact of Stochastic Lead Time, Information Quality, and Information Sharing: A Simulation Study , 2004 .

[24]  Xueping Li,et al.  Quantifying the impact of demand substitution on the bullwhip effect in a supply chain , 2011, Logist. Res..

[25]  Nils Rudi,et al.  Centralized and Competitive Inventory Models with Demand Substitution , 2002, Oper. Res..

[26]  Huynh Trung Luong,et al.  Measure of bullwhip effect in supply chains: The case of high order autoregressive demand process , 2007, Eur. J. Oper. Res..

[27]  Suresh Kumar Goyal,et al.  An EOQ Model with Substitutions between Products , 1996 .

[28]  Vineet Padmanabhan,et al.  Comments on "Information Distortion in a Supply Chain: The Bullwhip Effect" , 1997, Manag. Sci..