Analysis and simulation of the bullwhip phenomenon in supply chains

The need to manage inventories to ensure customers receive right products at right time is a central feature of business operation. Successful inventory management aimed at demand satisfaction with low safety stocks has become more difficult as supply chains grow in size, complexity and shift to global environment. One common phenomenon in supply chain management is that of bullwhip effect. Bullwhip effect indicates that small disturbance at customer end of supply chain, in the form of a change in amount ordered from its immediate supplier, causes increasingly large disturbances as it works through the chain. The end supplier then is faced with producing and shipping wildly varying order amounts to customer end. In this paper we explore these issues via simulations to demonstrate how, under a variety of scenarios, the ease with which bullwhip effect can occur, its impact on inventory control and to suggest remedies to circumvent resultant effects.