Measure of bullwhip effect in supply chain with price-sensitive and correlated demand

Abstract

In this paper, the bullwhip effect is analytically measured in a simple two-stage supply chain with one supplier, and one retailer who experiences a compound demand of a first-order autoregressive process and a stochastic retail price. Our study demonstrated that the bullwhip effect can be, under certain conditions, stronger or weaker than the case where the price is not considered. In addition, quantitative analysis is also performed to study the behavior of the bullwhip effect. It is found that the magnitude of both lead time and autocorrelation coefficient impacts on bullwhip effect has been affected by the appearance of price and its interactions with demand.