A PSO Weighted Estimating the Mean Downstream Demand to Mitigate the Bullwhip Effect in a Supply Chain

A deformation phenomenon occurring in business activity, called the bullwhip effect which comes from the demand information is not fully shared among the members of a supply chain, conducts the upstream manufacturer to excessively anticipate the demand capacity of the downstream retailer. The manufacturer improperly decides the amount of the products not only to raise the inventory cost on the way of poorly handling the actually downstream demand, but also to lose the chance of business deals due to its backordering. To cope with the bullwhip effect by taking into account the holding and backorder costs, an evolutionary method based on the Particle Swarm Optimization (PSO) algorithm to estimate the critical parameter, mean downstream demand, is proposed and computer validated in this paper such that the estimated inventory level could be close the really batch ordering of the manufacturer.