Chen, Y. F. and Disney, Stephen Michael  ORCID: https://orcid.org/0000-0003-2505-9271
2003.
The order-up-to policy "sweet spot": using proportional controllers to eliminate the bullwhip problem.
Presented at: EUROMA POMS Conference,
Lake Como, Italy,
16-18 June 2003.
Published in: Spina, G. ed.
One world? One view of OM?: the challenges of integrating research & practice.
Padova:
Servizi Grafici Editoriali,
pp. 551-560.
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Abstract
We develop a discrete control theory model of a stochastic demand pattern with both Auto Regressive and Moving Average (ARMA) components. We show that the bullwhip effect arises when the myopic Order-Up-To (OUT) policy is used. This policy is optimal when the ordering cost is linear. We then derive a set of z-transform transfer functions of a modified policy that allows us to avoid the bullwhip problem by incorporating a proportional controller into the inventory position feedback loop. With this technique, the order variation can be reduced to the same level as the demand variation. However, bullwhip-effect avoidance in our policy always comes at the costs of holding extra inventory. When the ordering cost is piece -wise linear and increasing, we compare the total cost per period under the two types of ordering policies: with and without bullwhip - effect reduction. Numerical examples reveal that the cost saving can be substantial if order variance is reduced using the proportional controller.
| Item Type: | Conference or Workshop Item (Paper) |
|---|---|
| Date Type: | Publication |
| Status: | Published |
| Schools: | Schools > Business (Including Economics) Research Institutes & Centres > Centre for Advanced Manufacturing Systems At Cardiff (CAMSAC) |
| Subjects: | H Social Sciences > H Social Sciences (General) H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management |
| Uncontrolled Keywords: | Bullwhip effect, Inventory, Order-Up-To policy, Control theory |
| Publisher: | Servizi Grafici Editoriali |
| ISBN: | 9788886281782 |
| Related URLs: | |
| Last Modified: | 25 Oct 2022 08:32 |
| URI: | https://orca.cardiff.ac.uk/id/eprint/53348 |
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