The relationship between the system cost and the Bullwhip effect in time-based VMI consolidation replenishment system

Abstract

In order to accomplish the cooperation between the system cost and the Bullwhip Effect in supply chain, this paper focuses on determining quantitatively the relationship between the system cost and the Bullwhip Effect in a two-level supply chain with a time-based consolidation replenishment system for VMI (TCR-VMI). The causal loop diagram and system dynamics model of a TCR-VMI system are developed based on analyzing its process and mechanism by the method of System Dynamics. Then the effect of a replenishment cycle on the system cost and the dynamic responses of order in a TCR-VMI system are quantitatively studied through the dynamic simulations under a random demand. Finally the relationship between the system cost and the Bullwhip Effect is quantitatively proposed through the regression of quadratic function. The results show that the Bullwhip Effect in TCR-VMI is becoming more and more evident as the replenishment cycle is getting longer. However, it is yet found that the relationship between the system cost and the Bullwhip Effect is a kind of concave function in TCR-VMI, which makes it possible to find an optimum replenishment cycle that enables the collaborative control between system cost and Bullwhip Effect in supply chain.