Identifying Bullwhip Effect in Supply Chains with correlated market demands

Abstract

This paper identifies the Bullwhip Effect related to market demands, which are correlated both to their previous value and amongst the markets. An analytical model is used to represent stochastic and dynamic natures of supply chains’ distribution networks. Control engineering tools such as block diagram and z-transform are applied in order to obtain closed form solutions that are crucial in the analytical analysis. A spreadsheet model is used to validate the analytical solution. 

The results show that the correlations in the demands have a significant impact on the magnitude of the Bullwhip and consequently supply chains’ costs.