Study of the Bullwhip Effect under Various Forecasting Methods in Electronics Supply Chain with Dual Retailers considering Market Share

Junhai Ma,Jing Zhang,Liqing Zhu

doi:10.1155/2018/8539740

Abstract

We establish in this paper a new two-stage supply chain with one manufacturer and two retailers which have a fixed market share in the mature and stable market with specific reference to consumer electronics industry. This paper offers insights into how the three forecasting methods affect the bullwhip effect considering the market share under the ARMA(1,1) demand process and the order-up-to inventory policy. We also discuss the stability of the order with the theory of entropy. In particular, we derive the expressions of bullwhip effect measure under the MMSE, MA, and ES methods and compare them by numerical simulations. Results show that the MA is always better in contrast to the ES for reducing the bullwhip effect in our supply chain model. When moving average coefficient is lower than a certain value, the MMSE method is the best for reducing the bullwhip effect; otherwise, the MA method is the best. Moreover, the larger the market share of the retailer with a long lead time is, the greater the bullwhip effect is, no matter what the forecasting method is.

Highlights

There is a high-risk behavior occurring frequently in many companies’ marketing activities, which is called bullwhip effect, first coined by Lee et al [1, 2]
We mainly study the impact of three forecasting methods on the bullwhip effect measure considering the market share in a stable mature supply chain with two retailers
In the autoregressive-moving average (ARMA)(1, 1) demand model, we use the three forecasting methods to establish the expressions of the bullwhip effect

Summary

Introduction

There is a high-risk behavior occurring frequently in many companies’ marketing activities, which is called bullwhip effect, first coined by Lee et al [1, 2]. As an extension, a new supply chain with one manufacturer and two retailers who both employ the ARMA(1, 1) demand process is made, and emphasis is put on the competition between the two retailers analyzed [18, 19] This model compared the impact of parameters on the bullwhip effect under various forecasting methods. This paper derives the expressions of the bullwhip effect under various forecasting methods in a two-stage mature and stable supply chain with one manufacturer and two retailers which have a fixed market share. Customer d2,t dt Figure 1: Two-stage supply chain model

Supply Chain Model

Measure of Bullwhip Effect considering Market Share

Behavior and Comparison of Bullwhip Effect by Three Forecasting Methods

Conclusions

Findings

A Proof of Proposition 3