The Dynamics of Material Flows in Supply Chains

Abstract

This paper reviews a range of methodological approaches to solving the bullwhip problem. The bullwhip problem is a dynamic consequence of supply chain structures and replenishment policies. The roles of the structure of the demand process, the treatment of time (continuous v discrete), forecasting techniques and lead-times will be reviewed. In practice, and in the theory, a variety of techniques have been used to smooth the dynamics of supply chains. These include, the use of sophisticated forecasting, pooling of demand and inventories, proportional feedback controllers and full-state feedback systems. Multi-echelon supply chains also present a number of interesting innovations. From the traditional, arms-length trading relationships, information sharing, vendor managed inventory and echelon stock policies can be developed. More sophisticated collaboration and co-ordination mechanisms may also lead to altruistic behaviour and result in superior performance. The impact of these procedures will be examined. Finally thoughts on new directions in bullwhip research will be given and an industrial case study on bullwhip reduction is presented.

Keywords: Bullwhip, supply chains, inventory, multi-echelon, order-up-to policy

JEL Classification: C22, E27, E23