Counteracting the Bullwhip Effect with Decentralized Negotiations

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¡±.

• Corporate Authors:

  Transportation Research Board

  500 Fifth Street, NW
  Washington, DC  United States  20001
• Authors:
  • Ouyang, Yanfeng
  • Daganzo, Carlos F
• Conference:
  • Transportation Research Board 86th Annual Meeting
  • Location: Washington DC, United States
  • Date: 2007-1-21 to 2007-1-25
• Date: 2007

Language

• English

Media Info

• Media Type: CD-ROM
• Features: Appendices; Figures; References;
• Pagination: 22p
• Monograph Title: TRB 86th Annual Meeting Compendium of Papers CD-ROM

Subject/Index Terms

• TRT Terms: Behavior; Decentralization; Demand; Labor negotiations; Market structure; Supply; Supply chain management; Travel behavior; Travel demand; Travel demand management; Travel surveys
• Subject Areas: Freight Transportation; Planning and Forecasting; Public Transportation; Society;

Filing Info

• Accession Number: 01047498
• Record Type: Publication
• Report/Paper Numbers: 07-2725
• Files: TRIS, TRB
• Created Date: Feb 8 2007 7:26PM