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System Performance Implications of Capacity and Flexibility Constraints on Bullwhip Effect in Supply Chains by Arunachalam Narayanan; Alan W. Mackelprang; Manoj K. Malhotra is a Business, Management and Accounting article available to read on EtoBox.

What is System Performance Implications of Capacity and Flexibility Constraints on Bullwhip Effect in Supply Chains about?

Utilizing behavioral experiments involving approximately one thousand subjects, we empirically evaluate the relationship between volume flexibility and the Bullwhip Effect (BWE). We not only evaluate differences in the level of BWE, but also differences in associated system performance. We find that systems with hard capacity constraints are effective at limiting BWE, but also produce very poor customer service levels. However, systems with low levels of volume flexibility generate similar performance as fully flexible systems but do so while also generating a lower BWE. In a multi-echelon setting, we show that having partial volume flexibility at the upstream echelon helps in reducing order variance, with no significant drop in service level in the supply chain. This is particularly useful in those manufacturing environments which prefer stable orders for production planning without affecting the downstream customer service level. Counterintuitively, both experiments uncovered instances of irrational behavior where participants invoked flexibility in ways that did not always enhance system performance. In addition, these experiments also established enhancements in BWE and system

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Author

Arunachalam Narayanan; Alan W. Mackelprang; Manoj K. Malhotra

Publisher

Wiley

Published

2021

Language

EN

Field

Business, Management and Accounting (Social Sciences)