Abstract for: Information Sharing in Supply Chains: A Systemic Approach
In a supply chain system, movements in the end-customer demand is amplified throughout the chain as one moves from the lowest echelon (retailer) to upper echelons (wholesaler, distributor, factory). It is reported that this amplification, which is known as the bullwhip effect, can significantly be reduced by sharing the end-customer demand information. In this paper, we first introduce a four-echelon supply chain model, add penalty variables to it, and simulate the model under two conditions; with and without sharing the end-customer demand information. We observe similar results as reported by other researchers; sharing the end-customer demand information has a strong effect in decreasing the amplification, which also results as decreased penalty values. We then introduce a new approach that requires sharing of further information and run the model with the new decision making heuristic based on this new approach. According to the simulation runs, the decision making heuristic suggested in this paper results in further improvement.