Abstract

http://ssrn.com/abstract=1876443
 
 

References (60)



 
 

Citations (1)



 


 



Systematic Risk and the Bullwhip Effect in Supply Chains


Nikolay Osadchiy


Emory University Goizueta Business School

Vishal Gaur


Cornell University - Samuel Curtis Johnson Graduate School of Management

Sridhar Seshadri


University of Texas at Austin - Red McCombs School of Business

July 1, 2011


Abstract:     
The variance of demand can be divided into two components, a systematic risk component that occurs due to economic factors, and an idiosyncratic noise component. Operational hedging addresses the total variance of demand, whereas financial hedging is useful against systematic risk. We investigate the systematic risk component of demand uncertainty using industry-level data for the manufacturing, wholesale trade, and retail trade sectors of the U.S. economy, and applying sales as a proxy for demand. We show that the degree of systematic risk increases substantially from retailers to wholesalers to manufacturers. Investigating two potential sources of this phenomenon, amplification of production series as predicted by the bullwhip effect and aggregation of orders placed by downstream industries, we find evidence supporting the latter.

Our results have implications for the relative values of different operational and financial hedging strategies chosen by a firm. It is particularly relevant to events such as the 2008-09 economic recession and the post-recession recovery.

Number of Pages in PDF File: 38

Keywords: Systematic risk, Supply chain management, Bullwhip effect, Order aggregation, Hedging

working papers series


Download This Paper

Date posted: July 1, 2011  

Suggested Citation

Osadchiy, Nikolay and Gaur, Vishal and Seshadri, Sridhar, Systematic Risk and the Bullwhip Effect in Supply Chains (July 1, 2011). Available at SSRN: http://ssrn.com/abstract=1876443 or http://dx.doi.org/10.2139/ssrn.1876443

Contact Information

Nikolay Osadchiy
Emory University Goizueta Business School ( email )
1300 Clifton Rd NE
Atlanta, GA 30326
United States
Vishal Gaur (Contact Author)
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
Ithaca, NY 14853
United States
HOME PAGE: http://www.johnson.cornell.edu/faculty/profiles/Gaur/

Sridhar Seshadri
University of Texas at Austin - Red McCombs School of Business ( email )
Austin, TX 78712
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,274
Downloads: 374
Download Rank: 30,625
References:  60
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.265 seconds