This project postulates the existence of a reverse bullwhip effect (RBWE) in which demand (order) variability increases as one moves downstream in a supply chain. (The classical bullwhip effect (BWE) describes the opposite phenomenon.) The RBWE is caused by supply uncertainty, as supply signals are distorted as they travel downstream. It may co-exist with the BWE, causing variability to be largest in the middle of the supply chain. This project examines the causes of the RBWE, studies strategies for mitigating it, and explores the relationship between the RBWE and the BWE. The first component will build theoretical and simulation models to determine the conditions under which the RBWE occurs, its effect on costs, and strategies for mitigating it. A behavioral study, based on the well known ""beer game,"" will test players' ordering behaviors during supply disruptions. The second component will formulate models that describe purchasing behavior in a shortage situation when demand and price are interdependent. It will examine the impact of disruption characteristics on the RBWE and the effectiveness of pricing as a strategy for mitigating it.
This research will enable a clearer understanding of ordering patterns in a supply chain during periods of supply uncertainty and provide a set of tools for reducing both types of bullwhip effects and their negative impacts on both supply chains and their customers. The RBWE is likely to be most pronounced during humanitarian crises and natural and man-made disasters, and a deeper understanding of the RBWE, and techniques for mitigating it, may be critical for meeting demand for emergency supplies, food, energy, and relief services. The models developed in this research will also be incorporated into a supply chain simulation software package written by one of the PIs; that software and the ""beer game"" software will be freely disseminated for research and educational purposes.
