Modeling and analysis of cash-flow bullwhip in supply chain

Rattachut Tangsucheeva, Vittaldas V. Prabhu

Research output: Contribution to journalArticle

20 Citations (Scopus)

Abstract

The bullwhip effect that occurs in supply chain inventory can distort demand forecasts and lead to inefficiencies such as excessive inventory, stock-outs, and backorders. In this paper we theorize that inventory bullwhip also leads to cash-flow bullwhip (CFB). Specifically, this paper focuses on studying CFB by developing mathematical and simulation models to analyze the relationship between inventory and cash-flow bullwhip by using Cash Conversion Cycle (CCC) as a metric. The mathematical models for inventory bullwhip are developed for two-stage and generic multi-stage supply chains, and then by extending these inventory models, the CFB models are developed for two-stage. CFB predicted by the proposed mathematical models approximately differ 14% from detailed simulation models. We find that increasing variability increases inventory and cash-flow bullwhip along with lead time, whereas increasing the demand observation period has the opposite effect. The average marginal impact of the bullwhip effect on the CFB is approximately 20%. Additionally, the CFB is also an increasing function of an expected value of inventory and a decreasing function of an expected value of demand.

Original languageEnglish (US)
Pages (from-to)431-447
Number of pages17
JournalInternational Journal of Production Economics
Volume145
Issue number1
DOIs
StatePublished - Sep 1 2013

Fingerprint

Supply chains
Mathematical models
Bullwhip
Supply chain
Modeling
Cash flow

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

Cite this

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abstract = "The bullwhip effect that occurs in supply chain inventory can distort demand forecasts and lead to inefficiencies such as excessive inventory, stock-outs, and backorders. In this paper we theorize that inventory bullwhip also leads to cash-flow bullwhip (CFB). Specifically, this paper focuses on studying CFB by developing mathematical and simulation models to analyze the relationship between inventory and cash-flow bullwhip by using Cash Conversion Cycle (CCC) as a metric. The mathematical models for inventory bullwhip are developed for two-stage and generic multi-stage supply chains, and then by extending these inventory models, the CFB models are developed for two-stage. CFB predicted by the proposed mathematical models approximately differ 14{\%} from detailed simulation models. We find that increasing variability increases inventory and cash-flow bullwhip along with lead time, whereas increasing the demand observation period has the opposite effect. The average marginal impact of the bullwhip effect on the CFB is approximately 20{\%}. Additionally, the CFB is also an increasing function of an expected value of inventory and a decreasing function of an expected value of demand.",
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Modeling and analysis of cash-flow bullwhip in supply chain. / Tangsucheeva, Rattachut; Prabhu, Vittaldas V.

In: International Journal of Production Economics, Vol. 145, No. 1, 01.09.2013, p. 431-447.

Research output: Contribution to journalArticle

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