Combining Analytical and Simulation Approaches to Quantification of the Bullwhip Effect

Nowadays, effective and competitive company operation can be achieved through incorporating the concept of supply chain operation into company management. Inventory control, as a critical part of the supply chain management, becomes the second most frequent application area for simulation technique in logistics (after manufacturing). The dynamics of supply chain operation is characterised by the bullwhip effect that reflects an increase in demand variability while moving upwards the supply chain. The bullwhip effect can lead to holding an excessive inventory, insufficient capacities and high transportation costs. It is important to investigate the magnitude of this effect by quantifying it. This paper proposes an analytical model for the analysis and numerical evaluation of the bullwhip effect in supply chains. Simulation technique is used to validate the results obtained from the analytical model. Based on the validation results, the logic of the analytical model is examined, and some specifications of the analytical model are analysed and described