Is there a performance tradeoff in managing order fulfillment and the bullwhip effect in supply chains? The role of information sharing and information type

Abstract

In a supply chain setting with demand and lead time variability, we use simulation to investigate the impact of information sharing on both the Bullwhip Effect (BWE) and the Order Fulfillment Performance (OFP) in a multi-echelon supply chain system. The results confirm past studies that indicate that using information sharing to coordinate orders in the supply chain generally reduces the negative effects of the bullwhip effect. However, particularly in situations when firms are unwilling or cannot share certain types of information, we find that there are significant performance tradeoffs in managing both order fulfillment and the negative impact of the BWE. Specifically, we find that the information type that leads to the best order fulfillment performance in these cases has the opposite impact on managing the bullwhip effect. Given these findings, we argue that type of information (ITYPE) that is used to set inventory up-to levels needs to be chosen carefully when information sharing is neither feasible nor practiced widely among firms in the supply chain.