A Discrete Event Simulation Analysis of the Bullwhip Effect in a Multi-Product and Multi-Echelon Supply Chain of Fast Moving Consumer Goods

Ramsha Ali,Shahzad Qaiser,Ruzelan Khalid

doi:10.18187/pjsor.v16i3.3088

Ramsha Ali, Shahzad Qaiser + Show 1 more

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https://doi.org/10.18187/pjsor.v16i3.3088

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Abstract

Timely delivery is the major issue in Fast Moving Consumer Good (FMCG) since it depends on the lead time which is stochastic and long due to several reasons; e.g., delay in processing orders and transportation. Stochastic lead time can cause inventory inaccuracy where echelons have to keep high product stocks. Such performance inefficiency reflects the existence of the bullwhip effect (BWE), which is a common challenge in supply chain networks. Thus, this paper studies the impact of stochastic lead time on the BWE in a multi-product and multi-echelon supply chain of FMCG industries under two information-sharing strategies; i.e., decentralized and centralized. The impact was measured using a discrete event simulation approach, where a simulation model of a four-tier supply chain whose echelons adopt the same lead time distribution and continuous review inventory policy was developed and simulated. Different lead time cases under the information-sharing strategies were experimented and the BWE was measured using the standard deviation of demand ratios between echelons. The results show that the BWE cannot be eliminated but can be reduced under centralized information sharing. All the research analyses help the practitioners in FMCG industries get insight into the impact of sharing demand information on the performance of a supply chain when lead time is stochastic.

Highlights

Chain management (SCM) can be perceived as the assimilation of business procedures from end-users through final suppliers providing products or services which add value for customers (Brandenburg & Seuring, 2011)
The objective of the experimental study is to analyse the demand variability occurring at each echelon due to stochastic lead time under both information sharing strategies
Under constant lead time with the centralized information sharing strategy, the results show that the bullwhip effect (BWE) is small

Summary

Introduction

Chain management (SCM) can be perceived as the assimilation of business procedures from end-users (customers) through final suppliers providing products or services which add value for customers (Brandenburg & Seuring, 2011). Other challenges reported by wholesalers and distributors are the inability to control and track inventory in multiple facilities such as warehouses or stores, the absence of clarity in inventory management and the shortage of the product traceability To overcome these challenges, companies require mechanisms to efficiently manage their supply chains and help them raise their profits, reduce costs and increase collaboration. Companies require mechanisms to efficiently manage their supply chains and help them raise their profits, reduce costs and increase collaboration These challenges could be mitigated through an integrated solution; i.e., by controlling inventory holding costs and improving manufacturing lead time (Duffie, Bendul, & Knollmann, 2017; Poles & Cheong, 2011; Seeanner, 2013; Öztürk 2018) especially in Fast Moving Consumer Goods (FMCG) industries

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