Controlling the bullwhip effect in a supply chain system with constrained information flows

The bullwhip effect problem is one of the most important issues in supply chain management. Limited information sharing increases the difficulty of reducing the bullwhip, effect and leads to inefficient supply chain management. The purpose of this paper is to explore new ways to reduce the bullwhip effect in supply chain systems that face uncertainties with respect to information sharing. We first present a supply chain state transition model, based on which we explore the endogenous mechanism of bullwhip effect, especially those related to impacts from limited information sharing. Then we propose a novel inventory control method and study the corresponding control optimization problem, with the aim of reducing inventory volatility in supply chains. Both quantitative analysis and simulation study are conducted. Simulation results show the effectiveness and flexibility of our proposed method in reducing bullwhip effect and in improving supply chain performance, even under conditions of limited information sharing. (C) 2012 Elsevier Inc. All rights reserved.