Supply Chain Networks With Multiple Retailers: A Test of the Emerging Theory on Inventories, Stockouts, and Bullwhips

While various approaches to mitigating the bullwhip effect have been proposed, the composition of the underlying supply chain is often taken for granted. This article develops a set of simulation models to investigate changes to the supply chain itself and their impact on the bullwhip effect, on-hand inventory, and stockouts. It is shown that particular supply chain networks have an impact on the bullwhip effect. Furthermore, the impact of supply chain networks on the bullwhip effect is moderated by the demand forecasting technique used. Finally, supply chain networks, forecasting techniques, and their interactions are found to influence on-hand inventory levels and stockout rates for firms within the supply chain. Results also suggest that no one particular type of supply chain network dominates in terms of dampening the bullwhip effect, lowering on-hand inventory levels, or reducing stockout rates. The optimal network depends on the forecasting technique used and other supply chain factors.