The Bullwhip Effect in Servicized Manufacturers

48 Pages Posted: 20 Dec 2021 Last revised: 22 Dec 2021

See all articles by Yimeng Niu

Yimeng Niu

Shanghai Jiao Tong University (SJTU) - Shanghai Jiao Tong University, Antai College of Economics and Management

Jing Wu

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Shenyang Jiang

Tongji University

Zhi-bin Jiang

Shanghai Jiao Tong University (SJTU)

Date Written: December 18, 2021

Abstract

The service-oriented economy has prompted traditional product-oriented manufacturing firms to increasingly infuse various services into their businesses. This research provides empirical evidence disclosing the impact of manufacturers' service offerings on two bullwhip issues, namely "felt" demand variability and intra-firm demand distortion. Through text mining on the 10-K filings of US-listed manufacturing firms, we identify the services offered by each manufacturer per year and distinguish between services that complement product sales, such as maintenance and repair, and services that substitute product sales completely, such as machine hours. Using difference-in-difference techniques, we find robust evidence that manufacturers' service offerings reduce the bullwhip effect in two steps: after providing basic complementing services, the "felt" bullwhip would decrease; and when manufacturers start to provide advanced substituting services, the intra-firm bullwhip will decrease. Furthermore, the demand-smoothing effect of service is intensified for a firm with younger age and less asset utilization, while the distortion-reduction effect is intensified for a firm with lower inventory turnover and higher inventory level. These findings expand our knowledge of manufacturers' servicization and the bullwhip effect by demonstrating that business transformation can mitigate the bullwhip effect and different service categories have different focuses in reducing the two bullwhip measures.

Keywords: bullwhip effect, servicization, textual data, demand variability, demand distortion

Suggested Citation

Niu, Yimeng and Wu, Jing and Jiang, Shenyang and Jiang, Zhi-bin, The Bullwhip Effect in Servicized Manufacturers (December 18, 2021). Available at SSRN: https://ssrn.com/abstract=3988802 or http://dx.doi.org/10.2139/ssrn.3988802

Yimeng Niu

Shanghai Jiao Tong University (SJTU) - Shanghai Jiao Tong University, Antai College of Economics and Management ( email )

1954 Huashan Road
Shanghai, Shanghai 200030
China

Jing Wu (Contact Author)

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong

HOME PAGE: http://www.jingwulab.org

Shenyang Jiang

Tongji University ( email )

Siping Road 1500
Shanghai, Shanghai 200092
China

Zhi-bin Jiang

Shanghai Jiao Tong University (SJTU) ( email )

KoGuan Law School
Shanghai 200030, Shanghai 200052
China

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