Analysis of the bullwhip effect with order batching in multi‐echelon supply chains

Abstract

Purpose – The purpose of this paper is to understand the effect of batching on bullwhip effect in a model of multi‐echelon supply chain with information sharing.Design/methodology/approach – The model uses the system dynamics and control theoretic concepts of variables, flows and feedback processes and is implemented using iThink® software.Findings – It has been seen that the relationship between batch size and demand amplification is non‐monotonic. Large batch sizes, that when combined in integer multiples can produce order rates that are close to the actual demand, produce little demand amplification, i.e. it is the size of the remainder of the quotient that is the determinant. It is further noted that the value of information sharing is greatest for smaller batch sizes, for which there is a much greater improvement in the amplification ratio.Research limitations/implications – Batching is associated with the inventory holding and backlog cost. Therefore, future work should investigate the cost implicat...