A COMPARATIVE STUDY OF SIMULATION AND TIME SERIES MODEL IN QUANTIFYING BULLWHIP EFFECT IN SUPPLY CHAIN

Bullwhip (or whiplash) effect is an observed phenomenon in forecast driven distribution channel and careful management of these effects is of great importance to managers of supply chain. Bullwhip effect refers to situations where orders to the suppliers tend to have larger variance than sales to the buyer (demand distortion) and the distortion increases as we move up the supply chain. Due to the fact that demand of customer for product is unstable, business managers must forecast in order to properly position inventory and other resources. Forecasts are statistically based and in most cases, are not very accurate. The existence of forecast errors made it necessary for organizations to often carry an inventory buffer called "safety stock". Moving up the supply chain from the end users customers to raw materials supplier there is a lot of variation in demand that can be observed, which call for greater need for safety stock. This study compares the efficacy of simulation and Time Series model in quantifying the bullwhip effects in supply chain management.