A simulation model of bullwhip effect in a multi-stage supply chain

Abstract

Bullwhip effect has always been considered as one of the critical problems in a supply chain that negatively influences costs, inventory, reliability and other important business processes especially in upstream agents. This problem has become even more critical due to the increased complexity of global supply chains. This paper proposes a simulation model to quantify the bullwhip effect in a multi-product, multi-stage supply chain which their agents release their order based on inventory level. Generic models based on a system dynamics approach are proposed to create specific supply chain to quantify the bullwhip effect as well as to reduce such effect. The supply chain of 'R.O.O Water' was selected to validate and demonstrate the flexibility of the proposed model. The result showed that the difference was never more than 1% for quantifying the bullwhip effect. Moreover, the proposed model allows users to find an optimal set of parameters to reduce the bullwhip effect by adjusting parameters manually or using an optimization function.