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The impact of exponential smoothing forecasts on the bullwhip effect
Author(s) -
Chen Frank,
Ryan Jennifer K.,
SimchiLevi David
Publication year - 2000
Publication title -
naval research logistics (nrl)
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.665
H-Index - 68
eISSN - 1520-6750
pISSN - 0894-069X
DOI - 10.1002/(sici)1520-6750(200006)47:4<269::aid-nav1>3.0.co;2-q
Subject(s) - bullwhip effect , exponential smoothing , supply chain , moving average , demand forecasting , smoothing , supply chain management , econometrics , computer science , exponential function , operations research , economics , operations management , mathematics , business , marketing , mathematical analysis , computer vision
An important phenomenon often observed in supply chain management, known as the bullwhip effect , implies that demand variability increases as one moves up the supply chain, i.e., as one moves away from customer demand. In this paper we quantify this effect for simple, two‐stage, supply chains consisting of a single retailer and a single manufacturer. We demonstrate that the use of an exponential smoothing forecast by the retailer can cause the bullwhip effect and contrast these results with the increase in variability due to the use of a moving average forecast. We consider two types of demand processes, a correlated demand process and a demand process with a linear trend. We then discuss several important managerial insights that can be drawn from this research. © 2000 John Wiley & Sons, Inc. Naval Research Logistics 47: 269–286, 2000