Counteracting the Bullwhip Effect with Decentralized Negotiations and Advance Demand Information

This paper shows how to reduce the bullwhip effect by introducing advance demand information (ADI) into the ordering schemes of supply chains. It quantifies the potential costs and benefits of ADI, and demonstrates that they are not evenly distributed across the chain. Therefore, market-based strategies to re-distribute wealth without penalizing any supplier are presented. The paper shows that if a centralized operation can eliminate the bullwhip effect and reduce total cost, then some of this reduction can also be achieved with decentralized negotiation schemes. Their performance is evaluated under different modes of probabilistic supplier behavior. For some forms of behavior the optimum is reached. But if suppliers are greedy and impatient the expected gain in wealth is relatively small. This is a case of economic “market failure”.

• Record URL:
  • https://escholarship.org/uc/item/0489z4qg
• 
• Availability:
  • Find a library where document is available. Order URL: http://worldcat.org/oclc/62333934
• Corporate Authors:

  University of California, Berkeley

  Institute of Transportation Studies
  McLaughlin Hall
  Berkeley, CA  United States  94720

  California Department of Transportation

  Office of Research, P.O. Box 942873
  Sacramento, CA  United States  94273-0001
• Authors:
  • Ouyang, Yanfeng
  • Daganzo, Carlos
• Publication Date: 2005-10

Language

• English

Media Info

• Media Type: Digital/other
• Features: Figures; References;
• Pagination: 11p
• Serial:
  • Research Report (University of California, Berkeley. Institute of Transportation Studies)

Subject/Index Terms

• TRT Terms: Logistics; Supply chain management
• Subject Areas: Economics; Freight Transportation; Highways; Research; Society; I10: Economics and Administration;

Filing Info

• Accession Number: 01019477
• Record Type: Publication
• Source Agency: UC Berkeley Transportation Library
• Report/Paper Numbers: UCB-ITS-RR-2005-6
• Files: CALTRANS, TRIS, ATRI, STATEDOT
• Created Date: Mar 1 2006 9:07AM