Bullwhip Effect Measure When Supply Chain Demand is Forecasting

Demand fluctuations in the supply chain lead to uncertainty in inventory policy and thereupon the inventory costs increase. This paper considers the impact of forecasting on the demand variation in a serial three-stage supply chain including a retailer, a manufacturer and a supplier. Four forecasting methods are considered and demand variations evaluated as bullwhip effect measure. We use analytical method to derive bullwhip effect to measure demand variations in second and third stage. Results show demand fluctuations increases as one move up supply chain. And the different forecasting methods lead to increasing the variations and the more previous data using leads to more precision.