Measure of the bullwhip effect considering the market competition between two retailers

Abstract

In order to consider the market competition, a new supply chain with one supplier and two retailers is established in this paper. Two retailers employ different AR(1) demand processes, respectively, and an order-up-to inventory policy characterises the inventory decisions. The bullwhip effect in this supply chain is measured under the moving average forecasting technique. We investigate the effects of the lead time, the span of forecast, market competition and the consistency of demand volatility on the bullwhip effect using the algebraic analysis and numerical simulation. Conclusions indicate that different factors lead to the bullwhip effect following different patterns in the supply chain. Moreover, some suggestions are present to help managers to control parameters that yield the lower bullwhip effect.