Reducing the impact of demand process variability within a multi-echelon supply chain

Abstract

Forrester analyzed Supply Chain and the different levels existing in it, as well as the participant companies and the role played by each of them inside the chain as a global group, and observed that small variations in end item demand caused oscillations that are amplified throughout the chain. This phenomenon, called the Bullwhip effect, has detrimental consequences on inventory levels and on all kind of inventory costs that may affect the added value of the activities throughout the logistics chain and ultimately affect the Net Present Value of all the activities in the chain. There is a set of collaborative supply chain structures which reduce these harmful consequences within the supply chain. The study presented in this paper quantifies how collaborative supply chain structures reduce the Bullwhip effect in terms of demand variability and inventory cost.