Measurement and Reduction of the Bullwhip Effect

Proceedings of ‏The 11th International Conference on Modern Research in Management, Economics and Accounting

Year: 2020


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Measurement and Reduction of the Bullwhip Effect

Tamás Faludi



In the 21st century, supply chain management has a big challenge: decrease the bullwhip effect, which is derived from the coordination problems of the extended chains. Because nowadays the chain members have many other partners, and the supply chain is not a simple chain according to the traditional approach; chains more look like big networks. And the cooperation is getting to be more difficult than ever. Companies define each other as competitors rather than cooperating partners. That is the reason why the information flow is not satisfactory and the information-sharing mechanisms do not exist. Partners do not be aware of the market demand and even of each other’s needs. Thus, the inventory management is focusing on safety, therefore they have big stocks, which causes costs. This is the bullwhip effect. The purpose of this paper is to introduce the bullwhip effect and to show how to measure the effect. There are solutions for the bullwhip effect that could be eliminated or at least decreased. These management tools are also presented in the paper. A case study with two cases shows what happens if the supply chain members realize the bullwhip effect and try to improve their processes to decrease the effect with some management tools.

Keywords: Supply Chain Management, Supply Chain Coordination, Bullwhip Effect, Bullwhip Ratio.