The Incremental Bullwhip Effect of Operational Deviations in an Arborescent Supply Chain with Requirements Planning

27 Pages Posted: 22 Jun 2006 Last revised: 11 Nov 2012

See all articles by ManMohan S. Sodhi

ManMohan S. Sodhi

City University London - Sir John Cass Business School

Christopher S. Tang

University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area

Date Written: March 27, 2011

Abstract

To mitigate the bullwhip effect in a supply chain, Lee et al. (1997) advocated the idea of sharing demand and order information among different supply chain entities by using compatible MRP or ERP systems. Even with full supply chain visibility afforded by an MRP system and no information distortion, we show that there is a “core” bullwhip effect inherent to any supply chain because of the underlying demand characteristics and replenishment lead times. In addition to this core bullwhip effect, we show how various operational deviations (inaccurate order placements, batching, lag in sharing demand forecast) contribute incrementally to the variance of the order quantity at not only at the node where the deviation is taking place but to all upstream supply chain nodes. We discuss some managerial implications of our results in the context of an UK manufacturer that motivated this work.

Keywords: bullwhip effect, supply chain, information distortion, quantification, MRP, ERP, UK manufacturer

JEL Classification: C32, D80, E17, M11

Suggested Citation

Sodhi, ManMohan S. and Tang, Christopher S., The Incremental Bullwhip Effect of Operational Deviations in an Arborescent Supply Chain with Requirements Planning (March 27, 2011). Available at SSRN: https://ssrn.com/abstract=910582 or http://dx.doi.org/10.2139/ssrn.910582

ManMohan S. Sodhi (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Christopher S. Tang

University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://www.anderson.ucla.edu/x980.xml

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