Minimizing the bullwhip effect in a supply chain: a simulation approach using the beer game

Abstract

In this research, the aim is to find the most appropriate inventory management logic and set of rules along with the optimal decision values that will minimize the bullwhip effect in a supply chain, taking the beer game supply chain as a reference model. In order to achieve this, a simulation model of the beer game supply chain is developed along with an ordering strategy based on the Economic Order Quantity with additional rules, such as no backorder policy, vendor-managed inventory, and taking into consideration route deliveries, all of which are implemented in the ordering algorithm. In the literature, there is extensive research conducted on the causes of the bullwhip effect and in the presence of certain inventory management policies. However, these terms are rarely combined with simulation modeling to provide satisfactory proven results. In this article, our proposed ordering algorithm avoids the bullwhip effect to a very large extent. The results show that approximately half the cost is incurred compared to recent studies with the same settings.