The Bullwhip Effect for Seasonal Demand Processes

• Activity Number: 129
• Type: Contributed
• Date/Time: Monday, August 4, 2014 : 8:30 AM to 10:20 AM
• Sponsor: Business and Economic Statistics Section
• Author(s): Chaitra Nagaraja*+ and A. Thavaneswaran and S. S. Appadoo
• Companies: Fordham University and University of Manitoba and University of Manitoba
• Keywords: supply chain ; bullwhip effect ; time series

Abstract

When retailers submit orders to their suppliers in response to demand, they must carefully balance inventory levels and expected future demand. Ensuring that the inventory can meet consumer demand often results in higher fluctuations in the ordering process than the variability of demand would initially suggest. This phenomenon is called the bullwhip effect and can depend on many factors such as the ordering policy, the lead time for an order to arrive, and even the demand process itself. We derive a bullwhip measure for a two-stage supply chain with an order-up-to inventory policy for a generalized seasonal, stationary ARMA demand process.