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Supply Chain Management: Issues and Models Lecture 4: Bullwhip Effect

Supply Chain Management: Issues and Models Lecture 4: Bullwhip Effect. Prof. Dr. Jinxing Xie Department of Mathematical Sciences Tsinghua University, Beijing 100084, China http://faculty.math.tsinghua.edu.cn/~jxie Email: jxie@ math.tsinghua.edu.cn

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Supply Chain Management: Issues and Models Lecture 4: Bullwhip Effect

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  1. Supply Chain Management:Issues and ModelsLecture 4: Bullwhip Effect Prof. Dr. Jinxing Xie Department of Mathematical Sciences Tsinghua University, Beijing 100084, China http://faculty.math.tsinghua.edu.cn/~jxie Email: jxie@ math.tsinghua.edu.cn Voice: (86-10)62787812 Fax: (86-10)62785847 Office: Rm. 1308, New Science Building

  2. i) Barilla (意大利面条制造商) 工厂 销售总公司 顾客 分销商 零售商 ii) P & G 3M (胶带) 顾客 P&G 批发商 零售商 信息流 物流 牛鞭效应（例）

  3. Amplified Demand Distortion(the Bullwhip Effects)

  4. Four sources of the bullwhip effect: Demand signal processing Rationing game Order batching Price variation

  5. Bullwhip Effect: An Analytical Model

  6. Bullwhip effect

  7. Events in each period

  8. Variables

  9. Demand Process

  10. Results for demand signal processing

  11. Optimal order-up-to level

  12. Optimal order quantity

  13. Amplification of order variance

  14. Summary Bullwhip effect exists even when the leadtime is zero Other causes of bullwhip effects: omitted here Sharing information is needed?

  15. Information sharing:Value of information

  16. Supplier (Manufacturer) Demand Retailer Basic Assumptions • The demand is assumed to be a simple autocorrelated AR(1) process • (2.1) • d > 0, -1<<1, and  is i.i.d. normally distributed with mean zero and variance 2. • << d

  17. Leadtimes

  18. Retailer’s ordering decision process

  19. Manufacturer’s decision

  20. Retailer’s Leadtime Demand

  21. Retailer’s Leadtime Demand

  22. Retailer’s Ordering Decision

  23. For manufacturer:

  24. Manufacturer’s leadtime demand

  25. Manufacturer’s leadtime demand: No information sharing

  26. Manufacturer’s order-up-to level: No information sharing

  27. Manufacturer’s leadtime demand: information sharing

  28. Manufacturer’s order-up-to level: information sharing

  29. Benefits of information sharing Comparing (3.10) with (3.13), one can quantify the benefits of information sharing: • Inventory level; • Cost evaluation

  30. Similar methods can be used to • Analyze the case when forecasting is used • Raghunathan S. “Information sharing in a supply chain: a note on its value when demand is non-stationary”. Management Science, April 2001, 605-610. • Analyze the value of advance demand information (the value of time) • Zhao X., Xie J. and Wei J. The Impact of Early Order Commitment on the Performance of a Simple Supply Chain. Working paper, 2002, Chinese University of Hong Kong.

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