Robust tests for the bullwhip effect in supply chains with stochastic dynamics

This paper analyzes the bullwhip effect in single-echelon supply chains driven by arbitrary customer demands and operated nondeterministically. The supply chain, with stochastic system parameters, is modeled as a Markovian jump linear system. The paper presents robust analytical conditions to diagnose the bullwhip effect and bound its magnitude. The tests are independent of the customer demand. Examples are given. Ordering policies that pass these tests, and thus avoid the bullwhip effect in random environments for arbitrary customer demands, are shown to exist. The paper also presents possible extensions to multi-echelon chains. (c) 2006 Elsevier B.V. All rights reserved.