The bullwhip effect in hybrid supply chain

Abstract

As the service is becoming the strategic preference in the manufacturing industry, more and more manufacturing companies provide customers with total solutions by integrating services into their core product offerings, which is usually implemented in so-called hybrid supply chain (HSC). The HSC is formed as a chain by a group of manufacturers and service providers who work together to offer total solutions to customers. In HSC, customers’ responses to variable service levels and the interaction between inventory strategy and service capacity strategy have a great impact on supply chain instability, which represents an important concern in supply chain research. To tackle this problem, we establish a system dynamics model, by taking the HSC for an elevator company in China as an example. Firstly, we analyzed the oscillation characteristics of service flow and product flow. Then, we proposed the performance metrics of bullwhip effect in HSC. Finally, based on the model, we find that the bullwhip effect of HSC could be smoothened by incorporating service capacity adjustment strategy into the inventory replenishment policy.