Controlling bullwhip and inventory variability with the golden smoothing rule

Disney, Stephen Michael ORCID: https://orcid.org/0000-0003-2505-9271, Farasyn, Ingrid, Lambrecht, Marc R., Towill, Denis Royston and Van De Velde, Wim 2007. Controlling bullwhip and inventory variability with the golden smoothing rule. European Journal of Industrial Engineering 1 (3) , pp. 241-265. 10.1504/EJIE.2007.014686

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Abstract

A major cause of supply chain deficiencies is the bullwhip effect. Supply chain managers experience this variance amplification in both inventory levels and replenishment orders. In this paper, we analyse a major cause of the bullwhip effect, namely the classical Order-Up-To (OUT) policy and suggest a remedy (a smoothing replenishment rule). In general, dampening variability in orders may have a negative impact on customer service due to increase in inventory variance. We quantify the variance of the Net Stock (NS) levels and compute the required safety stock as a function of the smoothing required. The contribution of this paper is the analysis of the tradeoff between bullwhip and inventory variance resulting in a 'golden smoothing rule'. The golden smoothing rule refers to the fact that the values of two proportional feedback controllers are set equal to the Golden Ratio. [Received 5 September 2006; Revised 22 January 2007; Accepted 13 March 2007]

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics) Centre for Advanced Manufacturing Systems At Cardiff (CAMSAC)
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management H Social Sciences > HE Transportation and Communications
Uncontrolled Keywords:	Bullwhip effect; supply chain management; SCM; inventory management; variance reduction; order-up-to policy; OUT policy; smoothing replenishment; safety stock; net stock variance; inventory variance; feedback control
Publisher:	Inderscience Publishers
ISSN:	1751-5254
Last Modified:	21 Oct 2022 09:56
URI:	https://orca.cardiff.ac.uk/id/eprint/38386

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