An empirical investigation on the antecedents of the bullwhip effect: Evidence from the spare parts industry

Abstract

Supply chain effectiveness and costs are affected by the demand variability, especially in the upstream echelons. The propagation of demand variability moving upstream in the supply chain has been widely studied in the literature and it is known as the Bullwhip Effect phenomenon. In this paper, the bullwhip effect in a European automotive spare parts chain is identified, with the aim of shedding some light on how demand variability propagates in different groups of products. We considered more than 30,000 products, characterised by different technical characteristics, demand classes and planning parameters.The results showed that the considered supply chain is affected by the bullwhip effect. Additional analyses suggested that the bullwhip effect is larger for fast moving products rather than for slow movers. Hence, dealers tends to decouple supply and demand and, when they are given incentives to forward-buy, they may prefer to forward-buy fast moving items. Moreover, as the dealers tend to exploit the promotional benefits by forward-buying in the final period of promotions, frequent switches from promotional to non promotional periods tend to increase the propagation of the demand variability.