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In a two-stage supply chain with two retailers, if they have correlated customer demand, forecasting based on their respective history order might cause significant forecast inaccuracy. Current forecast methods only use supply chain members’ own history demand information. However, when there are multi-retailer’s having correlated demand, the common forecasting methods ignore the forecast error caused by retailers’ interaction. Then, a question comes up that what is the relation between this forecast error and the bullwhip effect. The present paper studies relation of multi-terminals’ demand correlation and bullwhip effect in a two-stage supply chain with two retailers. Under centralized or decentralized information, (1) the impact of retailers’ demand correlation on retailers’/supplier’s bullwhip effect is studied; (2) the contrast of supplier’s and retailers’ bullwhip effect and the contrast of supplier’s/ retailers’ bullwhip effect under different information sharing condition are studied. The studies show that multi-terminals’ demand correlation is a cause of supply chain’s bullwhip effect.

The Impact of Demand Correlation on Bullwhip Effect in a Two-stage Supply Chain with Two Retailers