Soft computing and the bullwhip effect

Carlsson, Christer and Fullér, Róbert (1999) Soft computing and the bullwhip effect. Economics and Complexity, 2 (3). pp. 1-26. ISSN 1398-1706

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Abstract

We consider a series of companies in a supply chain, each of which orders from its immediate upstream members. Usually, the retailer's order do not coincide with the actual retail sales. The bullwhip effect refers to the phenomenon where orders to the supplier tend to have larger variance than sales to the buyer (i.e. demand distortion), and the distortion propagates upstream in an amplified form (i.e. variance amplification). We show that if the members of the supply chain share information, and agree on better and better fuzzy estimates (as time advances) on future sales for the upcoming period, then the bullwhip effect can be essentially reduced.

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