The evaluation of bullwhip effect on distribution system of a supply chain using centralized demand information method

Abstract

Bullwhip effect is a crucial problem in a supply chain. Bullwhip effect is distortion information between inventory and demand in the whole supply chain stages. This problem has not solved in the business recently, although there are many studies discussed this issue. Bullwhip effect gives a negative impact on the performance of the inventory system. This impact can reduce using Centralized Demand Information (CDI). This research aims to analyze the bullwhip effect that happens in between a manufacturer, distribution, and retailers to minimize inventory cost. This research aim is achieved by: i) Calculating the amount of bullwhip effect of PT. X that occurs in the bottled drinking water distribution system; ii) Implement the centralized demand information method to reduce the bullwhip effect on the supply chain water supply network; iii) Comparing inventory costs before and after cutting the bullwhip effect on the supply chain. The data such as time series, data in 12 periods (monthly), data on raw material procurement, holding cost and stockout costs. The reason for using CDI for calculating the bullwhip effect and Economic Order Quantity (EOQ) to calculate the inventory cost. Research findings show that using CDI will decrease the bullwhip effect and the impact is reducing inventory cost.