The impact of information sharing and risk pooling on bullwhip effect avoiding in container shipping markets

Abstract

The bullwhip effect is a well-known phenomenon that can be explained as the effect that demand variance is exaggerated as it moves upstream in a supply chain. Though the bullwhip effect has been extensively addressed, studies on its impact on the container shipping market have been neglected. Therefore, we consider a two-stage supply chain model, consisting of a shipping company and two shippers, and propose an integrated analytical model to quantify the beneficial impact on the handle of bullwhip effect by simultaneously incorporating information sharing and risk pooling. We not only analytically demonstrate the suggested approach can significantly reduce the amplification of demand variability, but also confirm that our method outperforms the current approaches numerically. Finally, by implementing the proposed approach in the Shanghai and Hong Kong container shipping markets, we illustrate that our method can dramatically improve the supply chain's performance in practice.