The Open Operational Research Journal

2008, 2 : 51-59
Published online 2008 October 07. DOI: 10.2174/1874243200802010051
Publisher ID: TOORJ-2-51

Stability Control in a Supply Chain: Total Costs and Bullwhip Effect Reduction

Fernanda Strozzi , Carlo Noè and José-Manuel Zaldívar
Engineering Faculty, Carlo Cattaneo University (LIUC), Castellanza, Italy.

ABSTRACT

The bullwhip effect refers to the phenomenon of demand distortion in a supply chain. By eliminating or controlling this effect, it is possible to increase product profitability. The main focus of this work is to apply a control technique, based on the divergence of system, to reduce the bullwhip effect in a single-product one echelon supply chain, in which an Order-Up-To (OUT) order policy is applied. First the relationships between bullwhip, stability of the supply chain and the total costs are analyzed. Second the divergence-based control strategy is applied to stabilize the supply chain dynamics with a considerable reduction of the total costs (> 30%) and, in relevant cases, of the bullwhip effect.

Keywords:

Bullwhip effect, order-up-to policy, supply chain.