Mitigating the bullwhip effect by ordering policies and forecasting methods

Abstract

The "bullwhip" effect, in which order variability increases as one moves up the supply chain, has been observed in a range of industries, modeled by several authors and various remedies suggested. This paper provides a simulation of the effect of improved forecasting methods, and finds that Holt's and Brown's methods substantially mitigate the bullwhip effect across a range of performance metrics. The end result is to identify ordering policies that perform particularly well in combination with these forecasting methods and indicate how they can be implemented in practice.