Impact of Order Splitting on Bullwhip Effect in Supply Chain: Case of Identical Lead Time at Distributors-Retailer Links

Abstract

This research work attempts to establish the bullwhip effect measure under the dual sourcing environment in which the lead time periods of two distributors to fulfill the retailer's orders are identical. Our model was based on the simple three-echelon supply chain with one supplier, two distributors and one retailer for a stationary first-order autoregressive, i.e., AR(1), incoming demand process. It was assumed that the minimum mean-square error forecasting technique and the order-up-to inventory policy were employed in all stages. The impacts of the autoregressive coefficient, the replenishment lead time and the proportion of order quantities placed by the retailer with the two distributors were investigated. A detailed comparison of the bullwhip effect of dual sourcing and that of single sourcing was also provided.