Bullwhip Effect Reduction: the Impact of Supply Chain Flexibility

The study addresses the impact of flexibility on the bullwhip effect, i.e. the increase of demand variability moving upstream along the SC. With this aim, a three stages SC is investigated, where producers/suppliers/retailers are connected by appropriate inventories. A reorder quantity ROQ (constant time interval) as stock policy has been adopted. The analysis takes into consideration two extreme degrees of flexibility and an intermediate degree of flexibility, named limited flexibility. Two performance indicators are monitored: (i) average stocks; (ii) standard deviation of the SC players demand. As first, production and delivery lead time and production capacity of each SC player are considered as a constant parameter. Then, both of those are modelled as stochastic variables, in order to investigate the impact of flexibility on the bullwhip effect reduction when uncertainty increases.