Analyzing the dynamic behavior of a two-echelon supply chain system under restricted inventory

The dynamic behavior of a two-echelon linear supply chain, consisting one distributor and one retailer was analyzed. Firstly, a dynamic model was proposed by analyzing four kinds of supply and demand in supply chain. Through studying the stability of four switched subsystems, the inherent principle of complexity in a supply chain system was identified that the switch between subsystems under restricted inventory produces complex behaviors. Then, a sufficient condition, which is that a inventory only in one supply chain node can not provide liberally for its downstream node, to control bullwhip effect was proved using Transfer Function. Finally, this paper indicated that improving the sensitivity of supply chain system can optimize its stability.