Exploring the Bullwhip Effect by Means of Spreadsheet Simulation
Robert N. Boute - robert.boute@vlerick.be
Operations and Technology Management Center, Vlerick Leuven Gent Management School, 3000 Leuven, Belgium, and Research Center for Operations Management, Katholieke Universiteit Leuven, 3000 Leuven, Belgium
Marc R. Lambrecht - marc.lambrecht@ecom.kuleuven.be
Research Center for Operations Management, Katholieke Universiteit Leuven, 3000 Leuven, Belgium,
Abstract
One of the main supply chain deficiencies is the bullwhip effect: Demand fluctuations increase as one moves up the supply chain from retailer to manufacturer. The beer distribution game is widely known for illustrating these supply chain dynamics in class. In this paper we present a spreadsheet exploring the two key causes of the bullwhip effect: demand forecasting and the type of ordering policy. We restrict our attention to a single product two-echelon system and illustrate how tuning the parameters of the replenishment policy induces or reduces the bullwhip effect. We also demonstrate how bullwhip reduction (dampening the order variability) may have an adverse impact on inventory holdings or customer service. The spreadsheet can be used to help students gain insight into how inventory control policies and forecasting influence the magnitude of the bullwhip effect and the quality of customer service.
Key words
bullwhip effect; replenishment rules; forecasting techniques; spreadsheet simulation; beer distribution game
History
Received: January 2007; accepted: July 2009.
Download the PDF
10.1287/ited.10.1.1
Supplement Materials
- Bullwhip (visit the Case Teaching Notes and Other Restricted Materials page to download these files)
Citation Information
Boute, R. N., M. R. Lambrecht. 2009. Exploring the bullwhip effect by means of spreadsheet simulation. INFORMS Trans. Ed. 10(1) 1-9. Available online at http://ite.pubs.informs.org/.
DOI: 10.1287/ited.1090.0038
