A study of the bullwhip effect in supply- and demand-driven supply chain

Abstract

A supply- and demand-driven supply chain model was built by introducing supply and demand function and price adjustment equation simultaneously, then the lead time demand was predicted and the bullwhip effect was analyzed. The results show supply and demand fluctuations can’t eliminate the bullwhip effect in any case due to the systematic factor, while there is an inverse relationship between the impacts of supply and demand fluctuation imposed on the bullwhip effect. The supplier has been in an active position in reducing the bullwhip effect, and reducing lead time is apparent to alleviate the bullwhip effect if lead time is in the optimal interval. Meanwhile, the supplier can develop production plan depending on previous multi-period historical product price information to restrain the bullwhip effect, and the retailer should choose the right sales strategy to control the bullwhip effect after analyzing consumers’ price consumption psychology and understanding consumers’ price sensitivity.