A measure of bullwhip effect in supply chains with a mixed autoregressive-moving average demand process

Abstract

In this paper, we quantify the impact of the bullwhip effect - the phenomenon in which information on demand is distorted as moving up a supply chain - for a simple two-stage supply chain with one supplier and one retailer. Assuming that the retailer employs a base stock inventory policy, and that the demand forecast is performed via a mixed autoregressive-moving average model, ARMA(1, 1), we investigate the effects of the autoregressive coefficient, the moving average parameter, and the lead time on the bullwhip effect. (c) 2007 Elsevier B.V. All rights reserved.