Modeling and Simulation of Compound Bullwhip Effect

Order batching in supply chains provides economic benefit in aggregating demand to save in production and transportation costs. However, rounding of orders to achieve a batch size is recognized as a source of the bullwhip effect problem within supply chains. This book studies supply chains consisting of a supplier feeding more than one retailer in batches to cover demand for a number of future time units. Aggregate bullwhip effect resulting from the synergistic effect between retailers demand is considered depending on demand and price parameters of the retailers and the number of demand forecasting time units. For higher system performance and lower costs, supplier should select the optimum batch size based on MMSE demand forecasting method, such that aggregate BWE of the retailers is less than the sum of separate BWE for each retailer.