Title: Smooth is smart: Bullwhip, inventory, fill-rates and the golden ratio
Abstract: A major cause of supply chain deficiencies is the bullwhip effect. This effect
refers to the tendency of the variance of the replenishment orders to increase
as one moves up a supply chain. Supply chain managers experience this
variance amplification in both inventory levels and replenishment orders. As a
result, companies face shortages or bloated inventories, run-away
transportation and warehousing costs and major production adjustment costs.
In this article we analyze a major cause of the bullwhip effect and suggest a
remedy. We focus on a unique replenishment rule that is able to reduce the
bullwhip effect. In general, bullwhip reduction may have a negative impact on
customer service due to inventory variance increases. Our analysis shows that
bullwhip can be satisfactorily managed without unduly increasing stock levels
to maintain target fill rates.
Publication Year: 2005
Publication Date: 2005-01-01
Language: en
Type: article
Access and Citation
Cited By Count: 5
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