The impact of information sharing on bullwhip effect reduction in a supply chain

Abstract

In this study, the impact of information sharing on bullwhip effect (BWE) is investigated using a four-echelon supply chain simulation model where each echelon shares some of the customer demand forecast information with a retailer, the lowest echelon. The level of the demand forecast shared at each echelon is represented as information sharing rate (ISR). Four different levels of ISR are considered to evaluate its impact on BWE. A full factorial design with 64 cases is used, followed by statistical analysis. The results show that (1) overall, higher ISR more significantly reduce BWE than lower ISR at all echelons; (2) further, the impact of ISR is not same between echelons. The ISR at an echelon where BWE is measured has the highest impact. However, its impact decreases at downstream echelons; (3) BWE is affected by not only the magnitude but also the balance of ISR’s across echelons, while the former has three times more impact than the latter; (4) lastly, we demonstrate that a highly unbalanced ISR may cause reverse bullwhip effect (RBWE), particularly when the level of unblance at downstream echelons is high and the uppermost echelon where BWE is measured has the highest ISR. Based on this demonstration, we derive a functional relationship between ISR’s and RBWE using regression analysis. We believe that results from this study provide useful implications and insights for better coordination and collaboration in a supply chain.