The bullwhip effect on inventory: a perspective on information quality

Jizhou Lu, Gengzhong Feng, Kin Keung Lai and Nengmin Wang

Applied Economics, 2017, vol. 49, issue 24, 2322-2338

Abstract: In recent years, there has been a vast increase in the quantity of information shared across supply chain. We investigate how the timeliness and accuracy of information quality affect the value of information sharing. We use the inventory bullwhip effect (BWE) to measure the value of information sharing in a two-level supply chain consisting of one retailer and one manufacturer. The retailer faces a price-sensitive demand and the price is an AR (1) process. Our study shows if customer demand and retailer’s immediate order are delayed, using retailer’s historical order quantity to forecast can decrease manufacturer’s BWE. If information errors happen, during delivery and utilization, information sharing is not always valuable for the manufacturer. Sometimes, no information sharing can decrease much more of BWE. If information errors occur when the retailer collects demand information, value of information sharing is more significant than when there are no information errors.

Date: 2017
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DOI: 10.1080/00036846.2016.1237762

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