The impact of the supply chain structure on bullwhip effect

The aim of this paper is to study how the structural factors of supply chain networks, (i.e. the number of echelons, the number of nodes and the distribution of links) impact on its dynamics performance (i.e. bullwhip effect). To do so, we systematically model multiple structures according to a robust design of experiments and simulate such structures under two different market demand scenarios. The former emulates a stationary condition of the market, while the latter reproduce the extreme volatility and impetuous alteration of the market produced by the current economic recession. Results contribute to the scientific debate on supply chain dynamics by showing how the advocated number of echelons is not the only structural factor that exacerbates the bullwhip effect. In particular, under a sudden shock in market demand, the number of nodes and the divergence of the supply chain network affect the supply chain performance. 2015 Elsevier Inc. All rights reserved. 1. Background and motivation Bullwhip Effect (BWE) refers to a progressive increase in order (demand) variance as order information passes upstream in a Supply Chain (SC) [1]. BWE is the responsible of inefficiencies in terms of total costs increase, profitability deterioration, increased inventory holding costs, and higher cost of capital [2–5]. Nowadays, about two-thirds of firms are affected by the BWE (see e.g. [6,7]. Thus, BWE continues to be one of the most widely investigated phenomena in modern-day SC management research [8,9]. Among the streams of research dealing with BWE, an important one has focused on showing its existence and on identifying its possible causes [10]. Among the different root causes that have been identified (please see Section 2), the ‘number of echelons’ or ‘number of channel intermediaries’ [11] is considered a root cause that explicitly depends on the structure of the SC. In fact, there is a common agreement on the existence of a positive correlation between the reduction of the intermediate stages in the SC and the reduction of the BWE [12,13,11,14–16]. For this reason, the reduction of channel intermediaries and the adoption of reduced SCs (such as the direct channel, or ‘‘the Dell model’’) [11] have been promoted as effective strategies to mitigate BWE. However, SCs are usually networks or global networks [17]. Hence, the number of echelons only represents an indicator of the structure of the Supply Chain Network (SCN). The structure of the SCN, defined as the arrangement of the various SCN nodes [18] is a critical decision for managers that is becoming increasingly complex [19]. In general, three main factors determine the structure of the SCN and consequently also the material flow from the raw materials stage to the final customer stage [10]: (1) the number of echelons, (2) the number of facilities at each echelon, and (3) the number of links between http://dx.doi.org/10.1016/j.apm.2015.03.012 0307-904X/ 2015 Elsevier Inc. All rights reserved. ⇑ Corresponding author. Tel.: +34 954488137. E-mail address: [email protected] (R. Dominguez). Applied Mathematical Modelling 39 (2015) 7309–7325