Vendor‐managed inventory and bullwhip reduction in a two‐level supply chain

Vendor‐managed inventory and bullwhip reduction in a two‐level supply chain Compares the bullwhip properties of a vendor managed inventory (VMI) supply chain with those of a traditional “serially‐linked” supply chain. The emphasis of this investigation is the comparative impact the two structures have on the “bullwhip effect” generated. Particular attention is paid to the manufacturer's production ordering activities as demonstrated using a simulation model based on difference equations. Documents and considers each of the four important sources of the bullwhip effect in turn. The analysis shows that with VMI implementation two sources of the bullwhip effect may be completely eliminated, i.e. rationing and gaming or the Houlihan effect, and the order batching effect or the Burbidge effect. VMI is also significantly better at responding to rogue changes in demand due to the promotion effect or to price induced variations. However, the effect of VMI on demand signal processing induced bullwhip or the Forrester effect is less clear cut. Concludes that on balance VMI offers a significant opportunity to reduce the bullwhip effect in real‐world supply chains. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Operations & Production Management Emerald Publishing

Vendor‐managed inventory and bullwhip reduction in a two‐level supply chain

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Publisher
Emerald Publishing
Copyright
Copyright © 2003 MCB UP Ltd. All rights reserved.
ISSN
0144-3577
DOI
10.1108/01443570310476654
Publisher site
See Article on Publisher Site

Abstract

Compares the bullwhip properties of a vendor managed inventory (VMI) supply chain with those of a traditional “serially‐linked” supply chain. The emphasis of this investigation is the comparative impact the two structures have on the “bullwhip effect” generated. Particular attention is paid to the manufacturer's production ordering activities as demonstrated using a simulation model based on difference equations. Documents and considers each of the four important sources of the bullwhip effect in turn. The analysis shows that with VMI implementation two sources of the bullwhip effect may be completely eliminated, i.e. rationing and gaming or the Houlihan effect, and the order batching effect or the Burbidge effect. VMI is also significantly better at responding to rogue changes in demand due to the promotion effect or to price induced variations. However, the effect of VMI on demand signal processing induced bullwhip or the Forrester effect is less clear cut. Concludes that on balance VMI offers a significant opportunity to reduce the bullwhip effect in real‐world supply chains.

Journal

International Journal of Operations & Production ManagementEmerald Publishing

Published: Jun 1, 2003

Keywords: Vendors; Inventory control; Management; Supply chain; Dynamics; Production planning and control

References

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