The bullwhip effect in capacitated supply chains with consideration for product life-cycle aspects

Bimal Nepal, Alper Murat and Ratna Babu Chinnam

International Journal of Production Economics, 2012, vol. 136, issue 2, 318-331

Abstract: This paper presents an analysis of the bullwhip effect and net-stock amplification in a three-echelon supply chain considering step-changes in the production rates during a product's life-cycle demand. The analysis is focused around highly complex and engineered products (e.g., automobiles), that have relatively long production life-cycles and require significant capital investment in manufacturing. Using a simulation approach, we analyze three stages of the product life-cycle including low volumes during product introduction, peak demand, and eventual decline toward the end of the life-cycle. Parts of the simulation model have been adopted by a major North-American automotive OEM as part of a scenario analysis tool for strategic supply network design and analysis. The simulation results show that performance of a system as a whole deteriorates when there is a step-change in the life-cycle demand. While restriction in production capacity does not significantly impact the bullwhip effect, it increases the net stock amplification significantly for the supply chain setting under consideration. Furthermore, a number of important managerial insights are presented based on sensitivity analysis of interaction effect of capacity constraints with other supply chain parameters.

Keywords: The bullwhip effect; Life-cycle demand; Capacity constraints; Net-stock amplification (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:136:y:2012:i:2:p:318-331

DOI: 10.1016/j.ijpe.2011.12.018

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