Quantifying the Bullwhip Effect in Supply Networks: The Impact of Supply Chains' Structure

An important observation in real supply chains - a phenomenon that is well known as the bullwhip effect - suggests that the variability of demand increases when moving up a supply chain, i.e. from consumers to the factory via the grocery stores and the central warehouses. Recent research on the bullwhip effect focuses on identifying the causes of the bullwhip effect and possibilities for reducing this phenomenon. Another important object of research is given by quantifying the increase in variability at each stage of the supply chain. The existing approaches quantifying the bullwhip effect neglect the network structure of real supply chains. Therefore, some relevant risk pooling effects associated with the network structure of supply chains are disregarded. In this paper we will provide an extension by including the typical network structure of real supply chains into the analysis. It will be shown that the bullwhip effect is overvalued if just a simple supply chain is assumed and risk pooling effects in supply networks are at present.