Vertical Contracts in a Supply Chain and the Bullwhip Effect

2020 ◽  
Author(s):  
Zhan Qu ◽  
Horst Raff
Keyword(s):  
Supply Chain ◽  
Supply Chains ◽  
Operations Management ◽  
Bullwhip Effect ◽  
Price Effect ◽  
Demand Shocks

This paper shows that decentralized supply chains, in which upstream firms use linear wholesale prices, may experience lower upstream production and downstream sales volatility than vertically integrated supply chains and may be less susceptible to the bullwhip effect by which the variance of upstream production exceeds the variance of downstream sales. The reason is that decentralized supply chains exhibit a price effect, whereby upstream producers raise wholesale prices in the case of positive demand shocks and lower wholesale prices in the case of negative demand shocks. Whereas upstream producers benefit from the price effect and, thus, from a dampening of the bullwhip effect, downstream firms may lose, and overall supply chain profit may decrease. This paper was accepted by Vishal Gaur, operations management.

scholarly journals Complex Characteristics of Multichannel Household Appliance Supply Chain with the Price Competition

Complexity ◽  
2017 ◽  
Vol 2017 ◽  
pp. 1-12 ◽  
Author(s):  
Junhai Ma ◽  
Wandong Lou
Keyword(s):  
Supply Chain ◽  
Supply Chains ◽  
Price Competition ◽  
Domain Of Attraction ◽  
Bullwhip Effect ◽  
Price Adjustment ◽  
Stable Region ◽  
Supply Chain System ◽  
Household Appliance ◽  
Internet Channel

This paper studies the complex characteristics caused by the price competition in multichannel household appliance supply chains. We consider a two-level household appliance supply chain system consisting of a manufacturer with an Internet channel and a retailer with a traditional channel and an Internet channel. Each channel’s price-setting follows the bounded rational decision process in order to obtain the optimal profit or more market share. Considering that the price competition often leads to the demand and order fluctuation, we also investigate the bullwhip effect of the multichannel supply chains on the basis of the order-up-to-inventory policy. From the numerical simulation, we find a system in a chaotic state will suffer larger bullwhip effect than a stable system, and the manufacturer’s Internet channel is helpful to mitigate the bullwhip effect. Our results provide some useful managerial inspirations for the household manufacturer and retailers. Firstly, each channel should make their retail price with a suitable price adjustment speed in the stable region, and each time pricing cannot exceed the domain of attraction. Secondly, the manufacturer can adopt a more radical pricing strategy in their Internet channel to mitigate the bullwhip effect. Thirdly, the price adjustment should be reviewed and be appropriately reduced if the price adjustment is too large.

Investigating the impact of inventory inaccuracy on the bullwhip effect in RFID-enabled supply chains using colored petri nets

2019 ◽  
Vol 14 (2) ◽  
pp. 360-384 ◽  
Author(s):  
Maria Drakaki ◽  
Panagiotis Tzionas
Keyword(s):  
Supply Chain ◽  
Supply Chains ◽  
Petri Nets ◽  
Information Sharing ◽  
Bullwhip Effect ◽  
Colored Petri Nets ◽  
Content Type ◽  
Multi Stage ◽  
The Impact ◽  
Serial Supply Chains

PurposeInformation distortion results in demand variance amplification in upstream supply chain members, known as the bullwhip effect, and inventory inaccuracy in the inventory records. As inventory inaccuracy contributes to the bullwhip effect, the purpose of this paper is to investigate the impact of inventory inaccuracy on the bullwhip effect in radio-frequency identification (RFID)-enabled supply chains and, in this context, to evaluate supply chain performance because of the RFID technology.Design/methodology/approachA simulation modeling method based on hierarchical timed colored petri nets is presented to model inventory management in multi-stage serial supply chains subject to inventory inaccuracy for various traditional and information sharing configurations in the presence and absence of RFID. Validation of the method is done by comparing results obtained for the bullwhip effect with published literature results.FindingsThe bullwhip effect is increased in RFID-enabled multi-stage serial supply chains subject to inventory inaccuracy. The information sharing supply chain is more sensitive to the impact of inventory inaccuracy.Research limitations/implicationsInformation sharing involves collaboration in market demand and inventory inaccuracy, whereas RFID is implemented by all echelons. To obtain the full benefits of RFID adoption and collaboration, different collaboration strategies should be investigated.Originality/valueColored petri nets simulation modeling of the inventory management process is a novel approach to study supply chain dynamics. In the context of inventory errors, information on RFID impact on the dynamic behavior of multi-stage serial supply chains is provided.

scholarly journals Supply Chain Competition: A Market Game Approach

2020 ◽  
Vol 66 (12) ◽  
pp. 5648-5664 ◽  
Author(s):  
C. Gizem Korpeoglu ◽  
Ersin Körpeoğlu ◽  
Soo-Haeng Cho
Keyword(s):  
Supply Chain ◽  
Supply Chains ◽  
Operations Management ◽  
Wholesale Price ◽  
Market Price ◽  
Market Game ◽  
Wholesale Market ◽  
Supply Chain Competition ◽  
Local Supply ◽  
Buyer Power

We study supply chains where multiple suppliers sell to multiple retailers through a wholesale market. In practice, we often observe that both suppliers and retailers tend to influence the wholesale market price that retailers pay to suppliers. However, existing models of supply chain competition do not capture retailers’ influence on the wholesale price (i.e., buyer power) and show that the wholesale price and the order quantity per retailer do not change with the number of retailers. To overcome this limitation, we develop a competition model based on the market game mechanism in which the wholesale price is determined based on both suppliers’ and retailers’ decisions. When taking into account retailers’ buyer power, we obtain the result that is consistent with the observed practice: As the number of retailers increases, each retailer’s buyer power decreases, and each retailer is willing to pay more for her order, so the wholesale price increases. In this case, supply chain expansion to include more retailers (or suppliers) turns out to be more beneficial in terms of supply chain efficiency than what the prior literature shows without considering buyer power. Finally, we analyze the integration of two local supply chains and show that although the profit of the integrated supply chain is greater than the sum of total profits of local supply chains, integration may reduce the total profit of firms in a retailer-oriented supply chain that has more retailers than suppliers. This paper was accepted by Charles Corbett, operations management.

scholarly journals Corona virus, tariffs, trade wars and supply chain evolutionary design

2020 ◽  
Vol 40 (10) ◽  
pp. 1649-1660 ◽  
Author(s):  
Robert B. Handfield ◽  
Gary Graham ◽  
Laird Burns
Keyword(s):  
Supply Chain ◽  
Supply Chains ◽  
Case Studies ◽  
Bullwhip Effect ◽  
Global Supply Chain ◽  
Global Supply Chains ◽  
Chain Management ◽  
Content Type ◽  
Constructal Law ◽  
The Usa

PurposeUsing the constructal law of physics this study aims to provide guidance to future scholarship on global supply chain management. Further, through two case studies the authors are developing, the authors report interview findings with two senior VPs from two multi-national corporations being disrupted by COVID-19. This study suggests how this and recent events will impact on the design of future global supply chains.Design/methodology/approachThe authors apply the constructal law to explain the recent disruptions to the global supply chain orthodoxy. Two interviews are presented from case studies the authors are developing in the USA and UK – one a multi-national automobile parts supplier and the other is a earth-moving equipment manufacture. Specifically, this is an exploratory pathway work trying to make sense of the COVID-19 pandemic and its impact on supply chain scholarship.FindingsAdopting the approach of Bejan, the authors believe that what is happening today with COVID-19 and other trade disruptions such as Brexit and the USA imposing tariffs is creating new obstacles that will redirect the future flow of supply chains.Research limitations/implicationsIt is clear that the COVID-19 response introduced a bullwhip effect in the manufacturing sector on a scale never-before seen. For scholars, the authors would suggest there are four pathway topics going forward. These topics include: the future state of global sourcing, the unique nature of a combined “demand” and “supply shortage” bullwhip effect, the resurrection of lean and local production systems and the development of risk-recovery contingency strategies to deal with pandemics.Practical implicationsSupply chain managers tend to be iterative and focused on making small and subtle changes to their current system and way of thinking, very often seeking to optimize cost or negotiate better contracts with suppliers. In the current environment, however, such activities have proved to be of little consequence compared to the massive forces of economic disruption of the past three years. Organizations that have more tightly compressed supply chains are enjoying a significant benefit during the COVID-19 crisis and are no longer being held hostage to governments of another country.Social implicationsAn implicit assumption in the press is that COVID-19 caught everyone by surprise, and that executives foolishly ignored the risks of outsourcing to China and are now paying the price. However, noted scholars and epidemiologists have been warning of the threats of pandemics since the severe acute respiratory syndrome (SARS) virus. The pundits would further posit that in their pursuit of low-cost production, global corporations made naive assumptions that nothing could disrupt them. Both the firms the authors have interviewed had to close plants to protect their workforce. It was indicated in the cases the authors are developing that it is going to take manufacturers on average one month to recover from 4–6 days of disruption. These companies employ many thousands of people, and direct and ancillary workers are now temporarily laid off and face an uncertain future as/when they will recover back to normal production.Originality/valueUsing the constructal law of physics, the authors seek to provide guidance to future scholarship on global supply chain management. Further, through two case studies, the authors provide the first insight from two senior VPs from two leading multi-national corporations in their respective sectors being disrupted by COVID-19. This study is the first indication to how this and recent disruptive events will impact on the design of future global supply chains. Unlike the generic work, which has recently appeared in HBR and Forbes, it is grounded in real operational insight.

Impact of Auto-regressive (AR) Process in Bullwhip Analysis in a Multi-location Supply Chain Network

2019 ◽  
Vol 6 (1) ◽  
pp. 19-26 ◽  
Author(s):  
Prabhat Mittal
Keyword(s):  
Supply Chain ◽  
Supply Chains ◽  
Network Structure ◽  
Bullwhip Effect ◽  
Supply Chain Network ◽  
Risk Pooling ◽  
On Demand ◽  
Forecasting Methods ◽  
Auto Regressive ◽  
Ar Process

The present study is an attempt to quantify the Bullwhip Effect (BWE) -the phenomenon in which information on demand is distorted in moving up a supply chain. Assuming that the retailer employs an order-up-to level policy with auto-regressive process (AR), the paper investigates the influence of forecasting methods on bullwhip effect. Determining the order-up-to levels and the orders for the retailers’ demands in an isolated manner neglects the correlation of the demands and the relevant risk pooling effects associated with the network structure of the supply chains are disregarded. It is illustrated that the bullwhip effects are significantly reduced with consideration of potential correlation between the retailers’ demand.

scholarly journals Control Model for Intelligent and Demand-Driven Supply Chains

2012 ◽  
pp. 262-283
Author(s):  
Jan Strandhagen ◽  
Heidi C. Dreyer ◽  
Anita Romsdal
Keyword(s):  
Supply Chain ◽  
Supply Chains ◽  
Operations Management ◽  
Relevant Information ◽  
Control Model ◽  
Information And Communications Technology ◽  
Future Research ◽  
Small Scale ◽  
Information And Communication ◽  
Trust And Power

Orchestrating supply chains is challenging. This chapter describes how to control a supply chain to make it truly demand-driven – based on the assumption that all relevant information is made available to all partners in real time. The chapter explores the elements of a framework for intelligent and demand-driven supply chain control, with regards to the overall concept and associated principles, and demonstrates these in a case example. Challenges to the realization of the proposed control model include trust and power, supply chain dynamicity and uncertainty, and required investments in competence, standardization, and information and communication technology. Some of these can be met through initial small-scale implementations of the proposed model, to demonstrate effects, and by exploiting facilities for information sharing and collaboration, like supply chain dashboards and control studios. Future research within operations management, technology and information and communications technology (ICT) will support broader realization of the proposed control model.

More Sustainable Supply Chains

2020 ◽  
Author(s):  
Robert D. Klassen ◽  
Jury Gualandris ◽  
William Diebel
Keyword(s):  
Supply Chain ◽  
Supply Chains ◽  
Operations Management ◽  
Design Thinking ◽  
Environmental Issues ◽  
Multiple Stakeholders ◽  
Research And Practice ◽  
Sustainable Supply Chains ◽  
Resource Investment ◽  
Complex Variety

Management efforts to design, develop, and operate more sustainable supply chains encompass an increasingly complex variety of social and environmental issues. More sustainable supply chains must now consider how product, operations, natural resources, technologies, and multiple tiers of organizations collectively create value for a diverse set of stakeholders. For multiple reasons, research and practice have tended to adopt an outcome-based perspective, whereby these efforts focus on a sustainability “destination,” which suffers from several shortcomings. Drawing from research in operations management, stakeholder theory, institutional theory, and innovation, this chapter posits how more sustainable supply chains might be co-defined and co-developed by emphasizing a journey that engages multiple stakeholders beyond supply chain partners. Design thinking is a very promising approach, with its iterative steps of empathy, defining the problem, ideate, prototype, and test. This journey-based perspective provides a framework for structuring engagement and encouraging openness to new observations and insights. Finally, the breadth and depth of collaboration with stakeholders, the nature of governance mechanisms, and the form and scale of resource investment all provide the means to assess the journey as it occurs.

Coordinating of multi-echelon supply chains through the generalized (R, S) policy

SIMULATION ◽  
2020 ◽  
Vol 96 (9) ◽  
pp. 767-778 ◽  
Author(s):  
Ahmed Shaban ◽  
Francesco Costantino ◽  
Giulio Di Gravio ◽  
Massimo Tronci
Keyword(s):  
Supply Chain ◽  
Supply Chains ◽  
Information Sharing ◽  
Negative Impact ◽  
Bullwhip Effect ◽  
Coordination Mechanism ◽  
Chain Model ◽  
Demand Forecast ◽  
Modeling Methodology ◽  
Information Demand

Numerous studies have confirmed the negative impact of the lack of coordination on supply chain performance. In particular, the lack of coordination leads to the bullwhip effect, which has severe impacts on supply chain stability. This paper evaluates a proposed coordination mechanism that allows a decentralized information sharing in multi-echelon supply chains. The proposed mechanism “Info-Smooth” utilizes the ordering rule of the generalized (R, S) policy in which a replenishment order can be transferred to upstream echelons including two pieces of information (demand forecast and inventory balance). As the generalized (R, S) can allow order smoothing, Info-Smooth combines the power of both information sharing and order smoothing. A simulation modeling methodology is employed to investigate the effectiveness of Info-Smooth in a multi-echelon supply chain. The factorial design results have shown that Info-Smooth is successful in mitigating the bullwhip effect whilst keeping acceptable inventory stability, compared to the traditional supply chain model.

scholarly journals Interval-valued Pythagorean fuzzy AHP method-based supply chain performance evaluation by a new extension of SCOR model: SCOR 4.0

2020 ◽  
Author(s):  
Ertugrul Ayyildiz ◽  
Alev Taskin Gumus
Keyword(s):  
Supply Chain ◽  
Performance Evaluation ◽  
Supply Chains ◽  
Operations Management ◽  
Fuzzy Ahp ◽  
Evaluation Model ◽  
Ahp Method ◽  
Scor Model ◽  
Globalizing World ◽  
Best Worst Method

Abstract Supply chain operations reference (SCOR) is a combined benchmarking, business process reengineering, and best practices, and it also references a model that is intended to be an industry standard. SCOR model is one of the best models to describe supply chain activities in operations management for research and practice alike. There are radical changes in the structure of supply chains as well as developing technology in today’s information age. The purpose of this paper is to extend the SCOR model with new metrics related to Industry 4.0 and digitalization to understand and evaluate the performance of supply chains. New metrics added to the SCOR model and a novel SCOR 4.0 model is proposed. The novel performance evaluation model is structured as a three-level hierarchical structure to evaluate the supply chain. This problem is handled as a multi-criteria decision-making problem. This study uses the hybrid Best worst method and Pythagorean fuzzy AHP method to determine the weights of metrics. SCOR model is adapted to performance evaluation of the supply chain in the globalizing world. The most important metrics on the supply chain performances are determined and classified. Level 1 metrics are evaluated by Best worst method and their inner levels are evaluated by the Pythagorean fuzzy AHP method and the importance weights of each level 2 and level 3 metrics are obtained. A real application for the oil supply chain is presented to show the applicability of the proposed model. It is aimed to show the SCOR 4.0 model can be used by both public and private sectors to improve their supply chain strategies in globalizing world.

SCM Models

2008 ◽  
pp. 1-29
Author(s):  
Toru Higuchi ◽  
Marvin Troutt
Keyword(s):  
Supply Chain ◽  
Supply Chains ◽  
Basic Concept ◽  
Bullwhip Effect ◽  
Physical Distribution ◽  
Dynamic Interactions ◽  
Information Distortion ◽  
Key Factor ◽  
Boom And Bust ◽  
The One

In this chapter, a basic concept of the SCM is discussed. A key factor for the SCM might be to control the dynamic interactions among the supply chain partners. Supply chains form a multi-echelon system to offer the products to the customers efficiently. However, they are composed of various partners whose purpose and interests do not always harmonize. In addition, supply chain processes are so long and complex that unexpected results might be happened for supply chains. The information distortion within the supply chains is the one of the major obstacles to control the supply chain effi- ciently and effectively. As a result, supply chains would be damaged by the bullwhip effect and the boom and bust. To highlight the character of SCM, a comparison is also made among the similar concepts, the business logistics, the physical distribution and Keiretsu.

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