Destocking, the bullwhip effect, and the credit crisis : empirical modeling of supply chain dynamics

In this paper we analyze the strong sales dip observed in the manufacturing industry at the end of 2008, following the bankruptcy of Lehman Brothers and the subsequent collapse of the financial world. We suggest that firms’ desire to retain liquidity during these times prompted a reaction characterized by the reduction of working capital, which materialized as a synchronized reduction in target inventory levels across industries. We hypothesize that such a reaction effectively acted as an endogenous shock to supply chains, ultimately resulting in the demand dynamics observed. To test this proposition we develop a system dynamics model that explicitly takes into account structural, operational, and behavioral parameters of supply chains aggregated at an echelon level. We calibrate the model for use in 4 different business units of a major chemical company in the Netherlands, all situated 4 to 5 levels upstream from consumer demands in their respective supply chains. We show that the model gives both a very good historical fit and a prediction of the sales developments during the period following the Lehman collapse. We test the model’s robustness to behavioral parameter estimation errors through sensitivity analysis, and provide a comparison with experimental studies based on the ‘beer game’. We observe that the empirical data is aligned with experimental observations regarding the underestimation of the supply pipeline

Internet of Things and Supply Chains: A Framework for Identifying Opportunities for Improvement and Its Application

Management and technology experts believe that the internet of things (IoT) has the potential to radically transform today’s supply chains. Several practice-focused publications describe various ways in which IoT capabilities can affect the supply chains in positive and negative ways. However, no generic framework describing the peculiar effects of IoT on supply chains has yet emerged. This study presents a theoretical framework to articulate the distinct ways in which the IoT can influence the management of supply chains. The use of this framework is illustrated by applying it to identify opportunities for improving two supply chains: the supply chain described in the famed “Beer Distribution Game” and a revised version of that supply chain. This framework, grounded in the foundation of organizational information processing theory, can be of practical use in guiding organizations envision novel ways to improve the performance of their supply chains by deploying the IoT capabilities.C.H. Robinso

On replenishment rules, forecasting, and the bullwhip effect in supply chains

In this review we focus on supply coordination and use the bullwhip effect as the key example of supply chain inefficiency. We emphasize the managerial relevance of the bullwhip effect and the methodological issues so that both managers and researchers can benefit

Impact of reverse logistics on supply chain performance

Purpose The purpose of this paper is to analyse the impact of reverse logistics on order and inventory variance amplification in a single-echelon supply chain and to propose a new order policy for dampening such amplification. Design/Methodology/Approach A general review of the literature on sustainable operations and on the impact of reverse logistics on SC performance provides the foundation for the study. We use difference equation math approach for modelling and analysing a closed supply chain. A proper design of experiment and data collected from the European Union statistics validate the obtained numerical results. Findings The variability of reverse flow in a closed loop supply chain increases the serviceable inventory variance. However, a proper design of the reverse flow considerably improves the global performance. To this purpose, we propose a new order policy, namely R-APIOBPCS, which explicitly considers the reverse flow of products. Research limitations/Implications The paper presents a math model describing a closed loop supply chain. No empirical analysis is provided. Future researches should evaluate the impact of the proposed R-APIOBPCS on more realistic closed loop supply chain models. Practical implications Our findings may motivate logistics and supply chain managers to implement CLSC when supported by innovative, suitable tools for the proper management of the information and material flow in the chain. Managers should be well acquainted that, by doing so, they not only satisfy National and International legislations but also achieve improvements in logistics performance. Originality/Value We propose a novel replenishment rule that accurately coordinates the upstream and downstream flows in a SC. The proposed order policy can be reasonably considered one of the advocated managerial tools for the proper management of reverse logistics: it allows reducing inventory and limiting the variability of the orders placed to suppliers in supply chain with reverse logistics

VMI-type Supply Chains: a Brief Review

The primary purpose of this paper is to highlight for the research community and practitioners the various aspects of using VMI-type supply chains in today’s business environment as well as a number of directions for future studies. In this regard, fifty articles published in major international journals, beginning in 1995, which contribute to the VMI-type supply chains are reviewed via a systematic review methodology. Our findings show there is an incremental growth in employing of VMI strategies in logistic and supply chains. This paper characterizes the design aspects required to configure and establish a VMI-type supply chain in the industry including demand pattern, number of products, contract type between two parties, and profit sharing scheme. Moreover, the current gaps on the current state of VMI-type supply chain in literature are highlighted in last section of this paper that may motivate future studies

A Diagnostic Framework for Demand Amplification Problems in Supply Chains

This dissertation delivers a framework to diagnose the Bull-Whip Effect (BWE) in supply chains and then identify methods to minimize it. Such a framework is needed because in spite of the significant amount of literature discussing the bull-whip effect, many companies continue to experience the wide variations in demand that are indicative of the bull-whip effect. While the theory and knowledge of the bull-whip effect is well established, there still is the lack of an engineering framework and method to systematically identify the problem, diagnose its causes, and identify remedies. The present work seeks to fill this gap by providing a holistic, systems perspective to bull-whip identification and diagnosis. The framework employs the SCOR reference model to examine the supply chain processes with a baseline measure of demand amplification. Then, research of the supply chain structural and behavioral features is conducted by means of the system dynamics modeling method. The contribution of the diagnostic framework, is called Demand Amplification Protocol (DAMP), relies not only on the improvement of existent methods but also contributes with original developments introduced to accomplish successful diagnosis. DAMP contributes a comprehensive methodology that captures the dynamic complexities of supply chain processes. The method also contributes a BWE measurement method that is suitable for actual supply chains because of its low data requirements, and introduces a BWE scorecard for relating established causes to a central BWE metric. In addition, the dissertation makes a methodological contribution to the analysis of system dynamic models with a technique for statistical screening called SS-Opt, which determines the inputs with the greatest impact on the bull-whip effect by means of perturbation analysis and subsequent multivariate optimization. The dissertation describes the implementation of the DAMP framework in an actual case study that exposes the approach, analysis, results and conclusions. The case study suggests a balanced solution between costs and demand amplification can better serve both firms and supply chain interests. Insights pinpoint to supplier network redesign, postponement in manufacturing operations and collaborative forecasting agreements with main distributors