Int J Adv Manuf Technol (2011) 54:1245–1261
DOI 10.1007/s00170-010-2987-6
ORIGINAL ARTICLE
A review of the causes of bullwhip effect in a supply chain
Ranjan Bhattacharya & Susmita Bandyopadhyay
Received: 16 November 2009 / Accepted: 11 October 2010 / Published online: 27 October 2010
# Springer-Verlag London Limited 2010
Abstract A review of the past research studies on the
causes of bullwhip effect is presented in this paper. This
paper is an effective study from the point of view that it
presents a detailed classified study of the overall research
studies on the effect of both the operational and the
behavioral factors on bullwhip effect. A total of 19 causes
of bullwhip effect have been shown here. We have
identified the various gaps of research in the past research
studies. An overview of the steps taken by the industries in
order to tackle the bullwhip effect is also provided at the
end of this paper. Directions for further research studies are
also provided in each subsection of this study and at the end
of this paper.
Keywords Bullwhip effect . Supply chain . Operational
causes . Behavioral causes
1 Introduction
A simple serial supply chain is generally composed of
several independent organizations representing supplier,
manufacturer, distributor, wholesaler, and retailer ([1, 2];
Fig. 1). There are several ways of evaluating the perfor-
mance of a supply chain, viz., (1) total cost of supply chain,
(2) service level, (3) average inventory held, (4) bullwhip
R. Bhattacharya (*)
Jadavpur University,
Kolkata, West Bengal Pin–700 032, India
e-mail: rbhattacharya@production.jdvu.ac.in
S. Bandyopadhyay
West Bengal University of Technology,
Kolkata, West Bengal Pin–700 064, India
e-mail: bandyopadhyaysusmita2008@gmail.com
effect. Among these performance evaluation procedures, we
concentrate on the bullwhip effect, since bullwhip effect is one
of the key areas of research in supply chain management
applications [3].
According to Chopra et al [4] and Geunes et al [5],
bullwhip can be defined as the amplification in the
fluctuation of order, as we move upwards in a supply chain
from the retailer to the manufacturer. The phenomenon can
be depicted through Fig. 1.
Figure 1 shows a simple five-echelon serial supply chain
with five entities–the supplier, the manufacturer, the
distributor, the wholesaler, and the retailer. Retailer places
order to a wholesaler based on the customer demand; the
wholesaler, in turn, places order to a distributor, and
distributor places order to the manufacturer. The manufac-
tured product is delivered to the end customer following the
same chain in the reverse direction as shown in Fig. 1.
Thus, each echelon in this chain needs to forecast demand
of its customer in order to fulfill the demand. If a particular
entity (say, the distributor) cannot access the actual demand
data of the end customers, then that entity will have to
depend on the order of its immediate customer (the
wholesaler, in this case), resulting in the error in the
demand forecast. In addition to this, each entity will tend to
satisfy all customer orders resulting in the amplification of
the variability in customer demand upwards in the supply
chain, which is termed as bullwhip effect.
The term “bullwhip” was originally coined by the
logistics executives at the Procter & Gamble (P&G).
Besides P&G, firms like Hewlett-Packard in the computer
industry, Bristol-Myers Squibb in the pharmaceuticals
industry, and Wal-Mart in the retail industry also experi-
enced a similar phenomenon [6]. Bullwhip is observed
frequently in industries that serve developing markets
where demand surges suddenly [7]. Examples of such
1246
Fig. 1 A serial supply chain Order
Lead
Order
Production
SUPPLIER MANUFACTURER
Lead Time
Deliver
Delivery
Lead
industries include telecommunications manufacturing, com-
puter components manufacturing, grocery, retail, automo-
tive industry, electronics industry, furniture industry, food,
apparel, and so on.
Bullwhip effect was first studied by Simon [8] and
Forrester [9]. Forrester [9] studied bullwhip through
simulation analysis and termed this phenomenon as
“demand amplification.” Sterman [10] studied bullwhip in
Massachusetts Institute of Technology (MIT) through “Beer
Distribution Game1” developed in MIT and played with
students. He indicated the requirement of appropriate
training for managers in order to get rid of bullwhip effect.
Other earlier studies observing bullwhip effect include the
research studies of Blanchard [11], Blinder [12, 13], and
Kahn [14]. Burbidge [15] had provided a detailed definition
of bullwhip effect. Bullwhip has become an ever-increasing
problem because the phenomenon is either misunderstood
or ignored.
Bullwhip can affect the supply chain in several ways. It
can lead to the following problems in a supply chain [16]:
(1) excessive inventory throughout the whole supply chain;
(2) insufficient or excessive capacity; (3) product unavail-
ability; (4) higher total supply chain cost; (5) loss of
revenue; (6) inaccurate production plans, and so on.
Bullwhip effect can further be extended to “Extended
Bullwhip Effect” [17], which can be defined as “any
change in demand expectation and/or variability, except
one condition—stable expectation and increasing variabil-
ity.” According to Wang et al. [17], the causes of extended
bullwhip effect can either be contrived or physical, viz.,
product attribute, characteristics of decision makers, quality
of supplies, characteristics of supply chain management,
macroscopic policies. Wang et al. [17] said that the
extended bullwhip effect can lead to the following prob-
lems: (1) reduction in efficiency; (2) manpower wastage;
(3) material wastage; (4) wastage of other resources; and (5)
unsatisfied customer demand.
1
Beer Distribution Game: Beer Distribution Game is a role-playing
simulation developed at MIT in the 1960’s. The purpose is to clarify
the advantage of adopting integrated approach in order to manage a
supply chain. It demonstrates the value of shared information across
the components of a supply chain.
Int J Adv Manuf Technol (2011) 54:1245–1261
Order Order Order
Lead Lead Lead
Order Order Order
Customer
Demand
DISTRIBUTOR WHOLESALER RETAILER
Deliver Deliver Deliver
Delivery Delivery Delivery
Lead Lead Lead
Among the previous research studies, we observe that
Geary et al. [18] highlighted ten operational causes of
bullwhip effect. In this paper, we present a review of the
past research studies on the causes of bullwhip effect. This
paper is an effective one in the view that it presents a
detailed “classified” study of the overall research studies on
bullwhip effect (BWE) in terms of its causes. We also
present directions to further research scope in this area. The
remaining sections of this paper are organized as follows.
Section 2 provides a brief overview of the classification of
the causes of bullwhip effect; section 3 reviews the
operational causes; section 4 reviews the behavioral causes;
section 5 provides an overview of the mitigation of BWE;
and section 6 provides conclusion and directions to further
research issues.
2 Causes of bullwhip effect
The causes of bullwhip are twofold: (1) operational causes
and (2) behavioral causes. The operational causes of
bullwhip include the following:
(1) Demand forecasting [19]; (2) order batching [19]; (3)
price fluctuation [19]; (4) rationing and shortage gaming
[19]; (5) lead time ([20–22]); (6) inventory policy ([23,
24]); (7) replenishment policy ([25–27]); (8) improper
control system [18]; (9) lack of transparency ([28–32]);
(10) number of echelons [33]; (11) multiplier effect [18];
(12) lack of synchronization [3]); (13) misperception of
feedback [34]; (14) local optimization without global vision
[34]; (15) company processes [34]; (16) capacity limits
[33].
Lee et al. [28] also pointed out another cause. According
to Lee et al. [28], the strategic interaction of two rational
supply chain members can also be a cause of bullwhip effect.
The behavioral causes include the following: (1) neglect-
ing time delays in making ordering decisions ([35, 36]); (2)
lack of learning and/or training [37]; (3) fear of empty stock
([35, 36]).
The causes depicted above are summarized in Fig. 2.
The root of all the causes is the lack of coordination among
the supply chain members.
Int J Adv Manuf Technol (2011) 54:1245–1261 1247

Demand Neglecting their robustness in dealing with the non-linear methods,

Forecasting Time Delays
easy-to-use feature, and flexibility. According to Skiadas
Ordering Lack of Learning [38], Mahajan et al. [39], and Islam and Meade [40], time
Policy & and /or Training
Batching series models do not provide effective and satisfactory
Fear of Empty results for the high-tech products. Chaharsooghi et al. [41]
Price Stock
Fluctuation
compared the effect of ARMA forecasting method with
Capacity Limits those for MA and ES methods and had shown that the use
Rationing
&
of accurate forecasting method does not necessarily lead to
BULLWHIP Company
Shortage Processes the reduction of BWE.
Gaming EFFECT
However, researchers have contributed significantly to
Lead Time Local Optimization the impact of forecasting, as delineated next. Some of the
Without Global
Vision significant research studies are mentioned below.
Inventory Policy
Lee et al. [19, 28] used AR(1) demand process for a two-
Misperception of echelon serial supply chain. Chen et al. [42] used AR(1)
Replenishment Feedback
Policies demand process for a two-echelon serial supply chain and
Improper Control Lack of derived a lower bound of BWE, when the retailer uses MA
System Synchronization method to forecast lead time demand. Hosoda and Disney
Lack of Multiplier [43] considered AR(1) demand process for end customer
Transparency Effect demand for a three-echelon supply chain and derived an
Number of Echelons expression for BWE and net inventory variance for each of
the three echelons.
Fig. 2 Causes of bullwhip effect in a supply chain Chen et al. [44] used ES to forecast lead time demand.
Muth [45], Goodman [46], and Graves [47] used MA
process as the forecasting method. Zhang [48] measured
3 Operational causes of bullwhip effect differences in BWE for the MA and ES methods used to
measure the lead time demand. Bayraktar et al. [3]
This section reviews the research studies on the operational investigated the impact of ES forecasting method on
causes of BWE. bullwhip effect for Electronic Supply Chain Management
(E-SCM). They considered Winter's ES with three param-
3.1 Effect of forecasting eters: α (for “levels”), β (for “trend”), and γ (for
“seasonality”). The paper finds out the following: (1)
The selection of a forecasting method makes a significant bullwhip effect decreases with the increase in seasonality;
influence on the BWE. This creates mismatch of demand (2) α and β parameters should be small in order to reduce
information that propagates upwards in the supply chain. A BWE; (3) BWE increases with the increase in the lead time.
vast number of research studies are observed in this area. Alwan et al. [49] used minimum mean squared error
The various methods of forecasting in the existing literature (MMSE) technique to study the BWE under Order-Up-To
can be categorized into the following divisions: (OUT) policy. Sun and Ren [16] studied the impact of three
forecasting methods, such as, MA, ES, and MMSE on the
1. Time series models
BWE. Reiner and Fichtinger [50] developed a dynamic
2. Machine learning models
model in order to evaluate the process improvement in a
3. Agent-based models
supply chain under the various forecasting methods. The
4. Control engineering models
various methods of forecasting used in this paper are: (1)
The following subsections discuss the research studies on the MA, (2) mean squared error, (3) regression model. The
effect of forecasting on the BWE for each of the above models. authors had shown that the time series models perform better
than the simple regression models, in terms of the BWE.
3.1.1 Time series modeling Sima et al. [51] used Kalman Filter for forecasting and
had shown that, in case of L≤2 (L: lead time), the use of
The various time series modeling approaches used in the Kalman filter may not lead to BWE.
literature include the following: (1) moving average (MA); Chen and Disney [52] considered AutoRegressive Inte-
(2) exponential smoothing (ES); (3) auto-regression (AR); grated Moving Average (ARIMA) demand pattern and
(4) auto-regressive moving average (ARMA). developed a discrete control theory for a myopic OUT policy.
Among these methods, the MA and ES methods have Gaalman and Disney [53] studied BWE under stochastic
been observed to be the most popular methods because of ARIMA(1, 1) demand process. They have proved that the co-
1248 Int J Adv Manuf Technol (2011) 54:1245–1261

variance between the inventory level and the demand forecast
can be a cause of BWE. Sohn and Lim [29] analyzed the
impact of forecasting method and information sharing on the
BWE using ANOVA technique. They used Speece and
McClachlan's method to represent customer demand.
Table 1 summarizes some of the major research studies
along with their forecasting methods as mentioned above.
Review of the time series models reveals that the
previous research studies have dealt mostly with the simple
demand processes such as MA, ES, AR(1), ARIMA(1,1).
Research studies dealing with more complex demand
processes need to be considered to fill this gap of research.
Forecasting based on more generalized demand processes,
such as AR (p) and ARIMA (p, q), are more relevant since
they may represent the demand process better [54]. Besides,
forecasting using Kalman Filter needs more investigation.
The literature also shows that the time series models are not
appropriate for the high-tech products. According to Lynn
et al. [55], the internal qualitative forecasting techniques,
such as, “Delphi method” are more reliable for forecasting
of high-tech products, whereas, the conventional quantita-
tive forecasting techniques are reliable for the low-tech
products. Thus, further research studies on BWE based on
the qualitative forecasting techniques are required. There
has also been little research studies on the effect of
forecasting on BWE in the Electronic Supply Chain.
Investigation on the effect of forecasting based on the
common techniques used in industries is also relevant.
These gaps are required to be abridged in order to
understand the effect of forecasting more effectively.
3.1.2 Machine learning modeling
The machine learning techniques include techniques like
the Artificial Neural Network (ANN), the Genetic Algo-
rithm. Carbonneau et al. [56] used different types of ANN
models and compared their performance with that of the
traditional methods in terms of their effect on bullwhip.
They proved that the machine learning techniques provide
better results than the traditional methods. Traditional
methods included MA, regression, and other time series
methods. They used linear regression based on 10 days'
data to find the trend that was used to forecast demand.
This forecast was the source of demand signal distortion
that resulted BWE. Carbonneau et al. [56] used three types
of ANN models, viz., back propagation, recurrence neural
net (RNN), and support vector machine (SVM) and had
shown that the forecasting errors for SVM and RNN are
less than those in the case of traditional forecasting
methods, such as, MA, regression, causing reduced bull-
whip, because of less distortion. The statistical learning
theory, in the form of SVM had been applied before by
Vapnik et al. [57]. Other works in the area of machine
learning include the research studies of Herbrich et al. [58].
However, the literature reveals little research studies based
on the machine learning techniques. Different types of neural
nets have not been experimented to show their effect on BWE.
More research studies using other machine learning techniques,
such as, genetic algorithm, are required to be done. Problems
in these techniques lie in the fact that these methods are much
more complex than the traditional methods.
3.1.3 Agent-based modeling
A few research studies are based on agent-based modeling.
Liang and Huang [59] used agent-based forecasting along
with real-coded genetic algorithm (RGA) to show the
decrease in total cost and smoother ordering variation
compared with the traditional methods. They compared the
performance of a supply chain in terms of ordering
variation and total cost between the agent-based forecasting
with those for traditional forecasting methods. Other works
applying agent-based forecasting include the works of
Swaminathan et al. [60], Fu et al. [61], Kimbrough et al.
[62], and McBurney et al. [63]. Fu et al. [61] applied agent-
based simulation of a PC assembling case to manage
inventory in a supply chain. They had developed a
framework of collaborative inventory management and
had shown the impact of demand uncertainty and lead time
on inventory variability. Kimbrough et al. [62] used Beer
Distribution Game simulation that produced BWE when
agents acted independently.

Table. 1 Summary of past

major research studies on
the effect of forecasting on
bullwhip effect
Forecasting method Contributors
MA Sun and Ren [16], Chen et al. [42], Muth [45], Goodman [46], Graves [47],
Reiner and Fichtinger [50]
ES Bayraktar et al. [3], Sun and Ren [16], Chen et al. [44].
MMSE Sun and Ren [16], Alwan et al. [49].
AR Lee et al. [19, 28], Chen et al. [42], and Hosoda and Disney [43].
ARIMA Chen and Disney [52], Gaalman and Disney [53]
Regression model Reiner and Fichtinger [50]
Kalman Filter Sima et al. [51]
Int J Adv Manuf Technol (2011) 54:1245–1261
The agent-based modeling shows clearly that BWE is
the result of the lack of coordination among the supply
chain members. It can be reduced or even be eliminated
through proper control of the agents' activities. The research
studies on the control of agents' activities are lacking in the
existing literature. This area seems to be a promising one in
terms of the possibility of proper control, mitigation, or
elimination of BWE.
In addition to the time series modeling, the machine
learning techniques and the agent-based modeling, another
type of modeling approach used in the literature is the
control engineering approach. Although this approach has
been used to control BWE, we find it worth mentioning here
because of the number of research studies in this direction.
Dejonckheere et al. [64] analyzed BWE using control
engineering theory under ES forecasting. They performed
transfer function analysis for both passing-on-orders mode
and within inventory control feedback systems. According to
Dejonckheere et al. [64], transfer function approach is
powerful since this approach includes “the ability to predict
system behavior in the time and frequency domains.” Some
of the transfer function related research studies include the
research study of Towill [65].
3.2 Effect of ordering policy and batching
A significant level of research studies on ordering policy
and batching has been observed in the literature. Among the
various ordering policies, the OUT policy has been used in
most papers because OUT policy is known as an optimal
policy since “for a given sequence of forecast errors of
demand over lead time, the policy minimizes the variance
of the inventory levels” [66]. In OUT policy, order up to a
certain level S is placed if the inventory level is below a
certain quantity s. It is customary to choose s and S such
that S–s = EOQ, where EOQ is the Economic Order
Quantity, the quantity to order each time at minimum cost.
Cachon and Lariviere [67] analyzed balanced ordering
policy and suggested that the balanced ordering along with
the small batch size and long order interval can reduce
supplier's demand variability. Cachon and Lariviere [68]
and Cachon and Fisher [69] investigated the impact of the
allocation mechanisms on retailer actions and supply chain
performance in terms of BWE. Higuchi and Troutt [70]
suggested that the repeat purchasers can reduce the impact
of BWE at higher stages of supply chain. Holland and
Sodhi [71] found that the level of bullwhip across one
echelon is proportional to the square of the batch size.
Disney et al. [72] analyzed the impact of transportation
batching within VMI Supply Chain [vendor-managed
inventory (VMI)]. They proved that it is possible to achieve
reduction in bullwhip effect and full transportation batches
simultaneously. Pujawan [73] considered the effect of two
1249
different lot sizing, namely, Silver Meal (SM) and Least
Unit Cost (LUC), with non-integer values under stochastic
demand. They had shown that SM rule results in more
stable order interval than LUC, but variable order quanti-
ties, whereas LUC results in stable order quantities but
variable order intervals.
Potter and Disney [74] considered the effect of order
batch size on BWE. Order sizes are taken to be multiple of
fixed batch size, in case of both deterministic and stochastic
demand rates. Two types of batching have been considered
in this paper: (1) time-based (or periodic) batching and (2)
quantity-based batching. They suggested that the batch
sizes should be reduced as much as possible, in order to
reduce the negative impact of batching.
Riddalls and Bennett [75] proved that the bullwhip
levels are related to the remainder of the ratio between the
batch size and the average demand. Chen and Disney [52]
studied myopic OUT policy. They had shown that bullwhip
effect is basically caused by the co-variance between the
inventory level and the demand forecast. The paper also
reveals that the classical OUT policy with ES or MA
forecasting will always produce bullwhip for all possible
demand patterns. Warburton and Disney [66] calculated
inventory variability and order variability in both discrete
and continuous time representations and compared them to
show that the two domains are managerially equivalent and
either domain can be used to study supply chain, in
practice. The paper studied OUT policy. A delay differen-
tial equation was formed to formulate the problem. Yan et
al. [76] has shown that the increase in the pack size
increases the batching effect which in turn increases BWE.
Rong et al. [77] studied reverse bullwhip effect (RBWE)
caused by the supply disruptions. They used beer distribu-
tion game as the simulation study where it was seen that the
players change their ordering behavior which causes the
reverse bullwhip effect. A discussion on RBWE is provided
in subsection 3.7 in this paper. Lalwani et al. [78] presented
a framework for developing a controllable and observable
state space model of the production and inventory control
policy. Other significant research studies include the study
of Childerhouse et al. [79]. The various research studies
discussed so far are summarized in Table 2.
However, in summary, the various ordering policies are (1)
order the same quantity in fixed intervals of time, irrespective
of the current inventory position; (2) order fixed quantity Q
(EOQ) if the inventory level is below s; (3) order following
OUT policy. The policies other than OUT policy are also
practiced in reality, but they have been considered much less
than OUT policy while investigating the combined effects of
ordering policies in the existing literature. Besides, effects of
different types of ordering policies along with the different
types of forecasting techniques have not been analyzed.
BWE can also be a result of different ordering policies
1250 Int J Adv Manuf Technol (2011) 54:1245–1261

Table. 2 Summary of past major research studies on the effect of ordering policy and batching on bullwhip effect

Contributors Contributions on ordering/batching policy adopted

Cachon and Lariviere [67, 68]
Riddalls and Bennett [75]
Disney et al. [72]
Holland and Sodhi [71]
Higuchi and Troutt [70]
Pujawan [73]
Gaalman and Disney [53]
Lalwani et al. [78]
Potter and Disney [74]
Warburton and Disney [66]
Balanced ordering along with small batch size and long order interval can reduce supplier's demand variability.
Bullwhip levels are related to the remainder of the ratio between the batch size and average demand.
It is possible to simultaneously achieve reduction in bullwhip effect and full transportation batches.
The level of bullwhip across one echelon is proportional to the square of the batch size.
Repeat purchasers can reduce the impact of bullwhip effect at higher supply chain stages.
SM (Silver Meal) rule results in more stable order interval than LUC (Least Unit Cost), but variable order
quantities, whereas LUC results stable order quantities but variable order intervals.
Bullwhip effect is basically caused by the co-variance between the inventory level and the demand forecast.
Presented a framework for developing controllable and observable state space models of the production and
inventory control policy.
Batch sizes should be reduced as much as possible, in order to reduce the negative impact of batching.
For a given sequence of forecast errors of demand over lead time, the policy minimizes the variance of the
inventory levels under OUT (Order-Up-To) Policy; calculated inventory variability and order variability in
both discrete and continuous time representation and compared them showing that the two domains are
managerially equivalent, and either domain can be used to study supply chain.

adopted by different supply chain partners. Investigation of
effect on BWE as a result of using different ordering policies
by various members may lead to the possibility of
controlling the BWE in a new way. Thus, we observe a
large gap of research in this direction. Ordering policies
based on the stochastic or fuzzy demand can also be a
realistic approach in this field.
3.3 Effect of inventory policies
Inventory policies specify decision rules with respect to the
point in time when a replenishment of the inventory should be
initiated as well as to the replenishment quantity that should be
ordered from the supplying node in the supply network.
Inventory and ordering policies are inter-related, since, order
amount and time of ordering depends on the inventory level.
Thus, in this subsection, the ordering policies will be
mentioned in relation to the inventory policies, as discussed
in the literature. The various inventory policies considered in
the existing literature are discussed below.
Hoberg et al. [80] discussed the effect of the following
three inventory policies on both the order and the inventory
variability.
1. Inventory on-hand policy: here, the ordering policy is
simply dependent on the on-hand inventory.
2. Base Stock policy: Two types of base stock policies
have been discussed.
(a) Installation stock policy: ordering decision is
based on installation stock. Installation stock is
the summation of the amount of inventory on-
hand at an echelon and the order amount ordered
by the preceding echelon.
(b) Echelon stock policy: ordering decision is based
on the echelon stock. Echelon stock is the
summation of the installation stock of an echelon
and the installation stock of the preceding echelon.
The authors had shown that–
1. Inventory on-hand policy is unstable in practical
scenarios in terms of its effect on the order and the
inventory variability, since small fluctuation in demand
may result into uncontrollable order and inventory
variability.
2. Both (a) and (b) are stable in terms of variability and
suitable for controlling inventory, and (b) is better than
(a).
The related literature using various base stock policies
are given below.
Veinott [81] developed base stock policy for a single
echelon system. Clark and Scarf [82] proposed echelon
stock policy for a multi-echelon supply chain. Axsäter and
Rosling [83] found out the circumstances under which
echelon stock policy is better than installation stock policy.
Aharon et al. [24] used Affinely Adjustable Robust
Counterpart method to control inventory and had shown
that the method helps to reduce BWE.
Liang and Huang [59] considered three independent-
demand inventory systems as defined below in brief.
1. Periodic Review System (P System): inventory is
reviewed at fixed interval of time, and order is placed
at the end of the review. Thus, inventory is reviewed
periodically, not continuously. Thus, here, the time
between the successive orders is fixed, but order
quantities vary.
Int J Adv Manuf Technol (2011) 54:1245–1261 1251

2. Continuous Review System (Q System): inventory is
reviewed or checked each time a withdrawal is made
from the inventory. Thus, it is the fixed ordering
quantity system where the ordering quantity is fixed,
but the time between the successive orders varies.
3. Optimal System (O System): inventory is reviewed at
fixed time intervals and order is placed at the end of
each review to reach the inventory up to a predeter-
mined level, if the actual inventory is below that level.
Thus, ordering quantities vary.
The authors used a combination of these three inventory
systems for a four-echelon supply chain and applied RGA
with each chromosome representing a combination of these
policies and each gene representing one of the echelons.
They had shown that the best combination is a (P Q P O)
inventory policy for Supplier (P system), Manufacturer (Q
system), Distributor (P system), and Retailer (Optimum
system), respectively.
Lalwani et al. [78] found out the stability bound of the
ordering system under the following (Table 3) inventory
and order-based production control system (IOBPCS).
The various research studies considering these systems
(IOBPCS) include the research studies of Simon et al. [84],
Towill et al. [85], Tang and Grubbström [86], and Disney
and Towill [87, 88].
Chandra and Grabis [23] considered Material Require-
ment Planning-based inventory control policy and had
shown that this policy reduces BWE.
Disney and Towill [89] compared the performance of a
VMI supply chain with that of traditional serial supply
chain, in terms of BWE. They had shown that the VMI supply
chain performs better than the traditional supply chain, in
terms of their impact on bullwhip. VMI is basically a strategy
in which a vendor manages customer's inventory. Wal-Mart
had applied VMI in the past, and since then, the policy has
become a popular one, especially, in the grocery sector.
Contributions from Cachon and Fisher [90], Lee et al. [28]
and Lee et al. [30] have classified VMI into the following
sub-classes: (1) Quick Response; (2) Synchronized Customer
Response; (3) Efficient Customer Response (ECR); (4)
Centralized Inventory Management; (5) Continuous Replen-
ishment; (6) Rapid Replenishment; (7) Collaborative Plan-
ning Forecasting Replenishment. The major inventory
policies considered in the literature and their contributors
are listed in Table 4.
Inventory policies discussed so far are single-level inven-
tory policies. The effect of multi-level inventory policy has not
been discussed in the literature. Multi-level inventory policy is
applicable for geographically spread inventory system. Here, a
local inventory store may be a customer of a higher level
inventory store or a centrally located warehouse. Besides,
effect of inventory policies based on stochastic demand needs
to be considered. Effect of consignment stock policy on
bullwhip has not been investigated in the existing literature.
Consignment stock is the stock legally owned by one party,
but held by another party. Ownership of consignment stock is
passed only when the stock is issued. Un-issued stock in a
warehouse may be returned to the manufacturer. We also feel
that the proper coordination in terms of VMI, consignment
stock, and the effect of the combination of various inventory
policies adopted by various echelons need to be investigated.
3.4 Effect of lead time
There are a few research studies on the impact of lead time
on bullwhip effect.
Liao and Shyu [91] are said to be the first researchers in
this area who had built a probabilistic inventory model
where lead time was one of the decision variables. Ben-
Daya and Raouf [92] expanded this work by adding another
decision variable—“ordering quantity”. These two research
studies did not consider the shortage. Thus, Ouyang et al.
[93] extended these studies by considering shortages.
Ouyang et al. [93] also considered “re-order point” as
another decision variable.
Ryu and Lee [94] and Bookbinder and Çakanyildirim
[95] considered lead time reduction to be an investment,
indicating the requirement of further research in this
direction. Heydari et al. [20] investigated the lead time

Table 3 Types of IOBPCS family

(Lalwani et al. [78]) Types Full form

OUT Order-Up-To
APVIOBPCS Automatic pipeline, variable inventory and order-based production control system
APIOBPCS Automatic pipeline, inventory and order-based production control system
VIOBPCS Variable inventory and order-based production control system
IOBPCS Inventory and order-based production control system
VIBPCS Variable inventory-based production control system
IBPCS Inventory-based production control system
OBPCS Order-based production control system
MPVIOBPCS Matched parameter variable inventory and order-based production control system
1252 Int J Adv Manuf Technol (2011) 54:1245–1261

Table 4 Summary of past major

research studies on the effect
of inventory policies on
bullwhip effect
Inventory policies
Inventory on-hand policy, base stock policy
Periodic review system, continuous review
system, optimal system
Inventory and order-based production
control system
Material requirement planning (MRP)-based
inventory control policy
Vendor-managed inventory (VMI)
Contributors
Hoberg et al. [80], Veinott [81], Clark and Scarf [82],
Axsäter and Rosling [83]
Liang and Huang [59].
Lalwani et al. [78], Simon et al. [84], Towill et al. [85],
Tang and Grubbström [86], Disney and Towill [87, 88]
Chandra and Grabis [23].
Lee et al. [28], Cachon and Fisher [69], Disney
and Towill [89]

variability in a serial supply chain and had shown that the
order variability increases with the increase in lead time
variability, but if the order variability increases uniformly
throughout the entire supply chain, then that will make no
impact on BWE. Huang and Liu [22] have shown that the
increase in the remanufacturing lead time increases the
bullwhip effect.
Wang et al. [21] investigated the impact of lead time on
bullwhip effect. They had shown that bullwhip effect
increases with the increase in lead time. The paper also
highlights some other important information such as:
reduction in lead time may be beneficial through–(1) Lower
safety stock; (2) Reduction in out-of-stock loss; and (3)
Improvement in customer service level.
The contributions and findings discussed above are listed
in Table 5.
From the above review on the effect of lead time on
BWE, we observe enough scope for further research study
in this area. First of all, the effect of fuzzy lead time
consideration in research on bullwhip has not been
addressed in the existing literature. Research on the
stochastic lead time is also insufficient. Lead time also
depends on inventory, ordering, and replenishment policies
used and the coordination among the supply chain
members. These issues have not been addressed in the
literature. Research studies on the reduction of lead time
through supply chain coordination also need to be explored.
3.5 Effect of lack of transparency
One of the major causes of bullwhip effect is the lack of
transparency about the system and some of its data, which
indicates the requirement of information sharing. A
considerable number of research studies have been con-
ducted in the existing literature in this area of BWE.
The information sharing for reducing bullwhip effect is
the “result of transfer risk and speculation of the down-
stream enterprises in supply chain, which increases the
instability, disorder of production, inventory management
and marketing” [31].
Information sharing may be of several types [96]. Some
of them are: (1) Echelon demand history; (2) Downstream
order schedule; (3) End-user demand history; and (4)
Downstream inventory information.
Information sharing as a way to reduce BWE has been
recommended by several authors in the existing literature.
Some of them have considered the beneficial effect,
whereas the others have considered the negative effect.
Some of the significant research studies considering the
beneficial effects include the studies of Lee et al. [28], Lee
et al. [30], and Agrawal et al. [32].
The policy of information sharing has been categorized
from several views in the existing literature. Sohn and Lim
[29] have categorized the information sharing into three
types, namely, decentralized policy, centralized policy, and
separated policy.
Decentralized policy “Information is not shared between
the supplier and retailers. Supplier only receives orders
from the retailers”.
Centralized policy “Information is completely shared. The
retailers share their net sales with the suppliers and with
these data, the supplier forecasts the future sales.”

Table 5 Summary of past major

research studies on the effect
of lead time on bullwhip effect
Contributors
Liao and Shyu [91], Ben-Daya and
Raouf [92], Ouyang et al. [93]
Heydari et al. [20]
Wang et al. [21]
Contributions
Built inventory models where lead time is one of the decision
variables
Order variability increases with the increase in lead time variability,
but if the order variability increases uniformly throughout the entire
supply chain, then that will make no impact on bullwhip effect.
Bullwhip effect increases with the increase in lead time
Int J Adv Manuf Technol (2011) 54:1245–1261
Separated policy Information is not shared. “The retailers
forecast the future demand and order them to the
suppliers”.
Thonemann [97] has divided the information sharing
into two types—Aggregated and Detailed.
Aggregated policy Considers aggregate information or the
information as a whole.
Detailed policy Considers the details of all the information
available.
The study of Sohn and Lim [29] had shown that the
complete information sharing policy does not always
produce best performance. Thus, selection of appropriate
information policy is essential for reducing BWE.
Viswanathan et al. [96] considered a four-echelon supply
chain along with the assumption that each echelon has
access to end-user demand history to forecast and plan
inventory at all echelons resulting lowest cost.
The existing literature shows the benefits of information
sharing more than the effect of the lack of transparency.
Few papers have observed that the inconsistency of the
information and the sharing of distorted information lead to
BWE. Moreover, most business organizations do not want
to share their vital information with their supply chain
partners. In this case, the role of supply chain contracts
plays a vital role in sharing information among the supply
chain members. Although there are a considerable number
of research papers on information sharing, but this area is
still lacking new ideas towards proper way of information
sharing.
3.6 Effect of replenishment policies
The existing literature has discussed various types of
replenishment policies.
Jakšič and Rusjan [25] discussed the effect of five
replenishment policies as given below.
1. First replenishment rule, called (R,D) rule, is expressed
mathematically as, Ot ¼ Ot1 þ g ðDt  Ot1 Þ, follow-
ing exponential smoothing equation, where
Ot order quantity at time t
Ot-1 order quantity at time t-1
g exponential smoothing coefficient
Dt demand forecast for period t
2. Second replenishment rule, proposed by Bowman [98],
is expressed mathematically as,
Ot ¼ Dt þ ð1  gÞðOt1  Dt Þ
3. Third replenishment rule, derived from Bowman [98] is
OUT policy or (R, S) policy. New concepts such as
1253
inventory position, safety stock, and lead time have
been incorporated in this rule and is expressed as,
Ot ¼ Dt þ ð1  gÞðIPtT  IPt Þ
Where
IPtT target inventory position
IPt net stock plus stock on order
4. Fourth replenishment rule, called (R, βIP) rule, is
expressed mathematically as,


Ot ¼ Dt þ b IPtT  IPt ;
where
b parameter of inventory position smoothing
5. Fifth replenishment rule, called (R, gO, βIP) rule, is
expressed mathematically as,
Ot ¼ Dt þ ð1  gÞðOt1  Dt Þ þ bðIPtT  IPt Þ
Among these rules, rule (1) and rule (2) cannot reduce
variability, whereas rule (3), rule (4), and rule (5) can
reduce variability.
Boute [99] analyzed the impact of replenishment policy
and had shown that the supply chain cost can be reduced
considerably if the echelons align their replenishment
policies. Lee and Wu [100] discussed the effect of two
replenishment policies, namely,
1. Traditional replenishment policies, including the above
policies
2. Statistical Process Control (SPC)-based replenishment
policy
SPC-based policy had shown better reduction of vari-
ability than the traditional methods. The significant works
in the field of SPC-based replenishment theory include the
research studies of Watts et al. [101] and Pfohl et al. [102].
Zhang and Zhang [27] considered two replenishment
systems: (1) time-based and (2) quantity-based, in VMI-
based system. They had shown that the BWE in quantity-
based system is more than that in the time-based system. In
time-based system, the vendor has small orders till a
replenishment level and dispatches the accumulated order
quantity at a certain time to its downstream customer. In
quantity-based system, the vendor does not dispatch at
certain time, but rather waits until a certain quantity of
order is accumulated.
Su and Wong [26] used Ant Colony Optimization
algorithm to design a replenishment system for a two-
stage supply chain for a “stochastic dynamic production/
forecast lot sizing problem under bullwhip effect”.
Table 6 shows the research studies on replenishment
policy and the contributors in this field.
1254 Int J Adv Manuf Technol (2011) 54:1245–1261

Table 6 Summary of past major research studies on the effect of replenishment policy on bullwhip effect

Contributors Contributions

Jakšič and Rusjan [25] Discussed the effect of five replenishment policies; shown that some of these policies induce bullwhip effect
while the others reduce the effect
Boute [99] Supply chain cost can be reduced considerably if the echelons align their replenishment policies.
Lee and Wu [100] Discussed the effect of two replenishment policies, namely, traditional replenishment policies, including the
policies and Statistical Process Control (SPC)-based replenishment policy.
Su and Wong [26] Designed a replenishment system using Ant Colony Optimization (ACO) algorithm.
Zhang and Zhang [27] Bullwhip effect in quantity-based system is more than that in time-based system.

The adoption of a replenishment system depends on
ordering and inventory policy and customers' demand.
Thus, the designing of appropriate replenishment systems
for various combinations of ordering and inventory policies
need to be considered. The existing literature has discussed
the effects of various types of replenishment policies on
BWE. The literature has also shown the classified effects of
replenishment policies.
3.7 Effect of price fluctuation
Price variability is another main cause of BWE. A few
research studies on the effect of pricing on BWE have been
observed in the existing literature. The relevant studies
basically have analyzed the effect of price variability in the
upstream supply chain over the downstream supply chain.
Since this effect flows from upstream to downstream in the
supply chain, which is the reverse to the direction of
bullwhip effect (from downstream to upstream), it is thus
called the Reverse Bullwhip effect in pricing [103].
Reverse Bullwhip effect occurs “when there is a high
degree of postponement in inbound logistics flows and a
high degree of speculation in outbound logistics flows”
[103]. The reasons for Reverse Bullwhip effect are:
limitation in production capacity, deficiencies in product
quality, unreliable/inaccurate information, unreliable trans-
portation, and other uncertainties in the upstream supply
chain. It may also happen due to promotional sales, supplier
quantity discount, and future market speculations, etc.
Özelkan and Çakanyildirim [104] had shown that the
forward BWE in order variability increases with the
increase in the price variability. Thus, reverse bullwhip
effect increases with forward BWE in order variability.
They have also analyzed the effect of various demand
functions on the reverse bullwhip effect. They have shown
that iso-elastic demand function results into the reverse
bullwhip effect. Logarithmic demand function may/may not
result in reverse bullwhip effect. Linear and logic demand
function does not result in reverse bullwhip effect.
Hamister and Suresh [105] also indicated the same
theory suggesting the reduction of BWE through price
stability. Mujaj et al. [106] investigated the effect of reverse
pricing on the business-to-business (B2B) case and had
shown the reduction in BWE as a result of reverse pricing
under stochastic demand and local information. Reverse
pricing is a form of dynamic pricing where price of a
transaction is given by the buyer instead of the seller.
Some of the other research studies in this direction
include the studies of Gerstner and Hess [107], Tyagi [108],
and Corbett and Karmarkar [109].
The existing literature is basically concerned with the
reverse BWE as a result of the price variability. There are a
few research studies in this direction, and thus, this area needs
to be explored further. Moreover, the effect of price variability
on B2B (Business-to-Business) case has been discussed, but
the same effects for B2C (Business-to-Customer) and C2B
(Customer-to-Business) cases have not been investigated.
Effect of pricing has more economic implications than those
which have been considered in the existing literature. Thus,
this area needs more exploration by the researchers.
3.8 Rationing and shortage gaming
In this case, the shortage gaming indicates the buyer's
strategy to face shortages in supply, and rationing is the
counteracting of supplier to the shortage gaming. In case of
supply shortage, buyers tend to over-order to secure their
inventory position, which is termed as shortage gaming.
Supplier, on the other hand, satisfies its customers by
rationing to smaller quantities. Shortage gaming causes
order variability in a supply chain. This leads to the
increase in the supply chain cost. The effect is amplified
if the buyer does not consider the orders that have already
been placed [110].
3.9 Miscellaneous operational causes
1. Improper control system: selection of an improper
control system for an echelon of a supply chain to
achieve target may lead to BWE.
2. Number of echelons: greater the number of echelons
greater is the possibility of aggravating BWE. A
Int J Adv Manuf Technol (2011) 54:1245–1261
minimum number of echelons facilitate having opti-
mum levels of inventories.
3. Multiplier effect: these are the scenarios where “orders
directly multiply in a knock-on effect, usually between
product manufacturers and their capital equipment
suppliers” [18].
4. Lack of synchronization: the lack of synchronization in
terms of delivery, receiving of goods, ordering, ship-
ping, and the like, may lead to BWE. To prevent the
risk resulting from the lack of synchronization, the
echelons may over-order, leading to the bullwhip effect.
5. Misperception of feedback: sometimes, the players in
an echelon do not understand the dynamics of their
supply chain [34]. For example, they may not correctly
interpret the incoming delivery schedules.
6. Local optimization without global vision: this problem
deals with optimization of own echelon without
considering its effect on the other echelons, resulting
into increased supply chain cost and increasing BWE
[34].
7. Company processes: company processes [34] indicate
the “variability of machine reliability and output” and
“variability in process capability and subsequent prod-
uct quality” [111]. These problems may cause uncer-
tainties among companies, which in turn, may lead to
the greater order variability [111].
8. Capacity limit: capacity limits of echelons may lead to
BWE. A particular limit to the supplier capacity may
lead to the customer order variability.
The research studies on miscellaneous causes, rationing,
and shortage gaming as observed in the existing literature
are insufficient. Some of these causes, such as, mispercep-
tion of feedback and local optimization without global
vision, are the results of the lack of proper knowledge and
learning, which is discussed under the following section.
These causes are required to be investigated further.
4 Effect of human behavior
The behavioral causes have mostly been tested in labora-
tory settings or through case studies. Beer game, as a
simulation tool, has been used in laboratory setting.
1. Neglecting time delays in making ordering decisions
Croson and Donohue [35] noted that, in many cases,
the supply chain players do not consider time delays
while making ordering decisions, especially. They also
investigated coordination risk and uncertainties of the
actions of the decision makers, which in turn, lead to
instability and variability in orders. The time delays may
include ordering delay, delivery delay, shipping delay,
which can be reduced [36] in order to reduce BWE.
1255
2. Lack of learning and/or training
Negligence on the part of the participants and
various decision-making problems generally arise out
of the lack of proper knowledge and/or training. Yan
and Katok [37] suggested two types of training:
(a) Role-specific training in which participants are
allowed to assume a role to play and are allowed
to take a decision to solve a particular problem.
The participants learn to take critical decisions
through this kind of training.
(b) System-wide training which permits system thinking
that directs attention to underlying interrelationships.
3. Fear of empty stock
The echelon players may place excess order amount
out of the fear of facing empty stock and losing
customers. This behavior may lead to tremendous order
variability causing BWE.
Nienhaus et al. [112] also investigated the effect of
human behavior on bullwhip effect using online beer
distribution game. They had shown that human
behavior can act as a barrier to proper information
flow in a supply chain causing BWE. The reduction of
BWE is possible through proper information exchange
among the partners of a supply chain.
From the above studies, it can be inferred that BWE
is caused by both operational and behavioral causes.
Thus, both the causes should be taken care of while
controlling the BWE. In an attempt to mitigate BWE,
learning has a positive effect on both information
acquisition and interpretation [113]. Thus, learning
should be emphasized to get rid of order variability.
While studying the behavioral causes, we realized that
both operational and behavioral causes need to be
considered in an integrated fashion in order to mitigate
or eliminate BWE. Besides, all the research papers rely
on the laboratory experiments to draw conclusions on
the behavioral causes. The difference in settings between
controlled laboratory environment and real industrial
environment indicates the need for drawing conclusions
on behavioral causes based on the experiments conducted
in real industrial setup.
5 Mitigation of BWE
The mitigation of BWE becomes a relevant issue whenever
the causes of BWE are discussed. Although this paper is
focused on the causes of BWE, we realize that the mitigation
of BWE is a related area as well. Thus, we give a brief
overview of the mitigation of BWE below. We present this
brief study in two subsections. Subsection 5.1 presents a brief
overview of the research studies on the mitigation of BWE in
1256
the existing literature and subsection 5.2 provides a brief
overview of how the industries are handling BWE. Although
the content of subsection 5.2 is also obtained from the
existing literature, we divide the discussion in this section in
two subsections so as to make it easy to differentiate between
the treatments practiced in practical and theoretical handling
of BWE.
5.1 Mitigation of BWE as proposed in the existing literature
The proper identification of the causes of bullwhip is
required for the mitigation of its effect. The research studies
on the reduction of BWE as observed in the existing
literature have reduced BWE through agent simulation
([114, 115]), H∞ control ([116–118]), Genetic Algorithm
([119, 120]), Fuzzy Controller [121], and contracts.
However, since BWE is the result of the lack of information
transparency which is the result of the lack of coordination
among the supply chain partners, thus, proper coordination
is the key to mitigate BWE. Therefore, new avenues of
research studies on the supply chain coordination are
required to be carried forward so as to get rid of BWE.
Some of the significant research studies, investigating the
mitigation of BWE, are mentioned below.
The existing literature is basically showing the various
coordination mechanisms to mitigate BWE. Zarandi et al.
[114], De La and Lozano [115], Zarandi et al. [122], and
Hassan and Soh [123] discussed agent-based coordination
to mitigate BWE. Each of these studies considered agent-
based coordination in different forms. For instance, Zarandi
et al. [114] considered two agents—middle agents and
software agents. Middle agents include brokers, controllers,
facilitators, or mediators, and they collect data for the
software agents. The software agents make use of these
data to coordinate among supply chain members. Disney et
al. [124] discussed the coordination of retailers with other
supply chain members to mitigate BWE. Guo et al. [116],
Huang et al. [117], Liu et al. [118], Guo [125], and Guo and
Huang [126] proposed coordination among supply chain
members through control theory in the form of H∞ method.
Ouyang and Daganzo [127] also suggested negotiation
schemes to mitigate BWE. O'donnell et al. [120] applied
Genetic Algorithm to mitigate BWE.
Among the other research studies, Wright and Yuan
[128] have proposed a better forecasting method called
Holt's and Brown's method to mitigate BWE. Boute et al.
[129] suggested that a smoother order pattern and less
variable lead time can mitigate BWE. Lu et al. [119]
suggested that the use of appropriate ordering policies for
the echelons of a supply chain may mitigate BWE.
Gaalman [130] suggested the use of appropriate ordering
policy for a particular forecasting method. Lin and Lin
[131] proposed the mitigation of demand variance to reduce
Int J Adv Manuf Technol (2011) 54:1245–1261
BWE. Other significant studies include the studies of Sheu
[132] and Lin et al. [133].
5.2 Mitigation of BWE in industry
Industry leaders are facing BWE through: (1) information
sharing, (2) channel alignment strategies, (3) implementing
new incentives to the supply chain partners, (4) increasing
operational efficiency, and (5) “defining new original
relationships” [19].
In case of “demand forecasting” as a cause of BWE, one
remedy is to make downstream supply chain partners' data
available to the upstream supply chain partners [19]. As a
result, more information will be available to the upstream
supply chain partners. Thus, the understanding of the
system dynamics and the use of the Point-Of-Sales data
are required. IBM, Apple, and HP have made “sell-
through” data as the part of their contract with resellers
[19]. The Electronic Data Interchange (EDI) and Computer-
Assisted Ordering (CAO) are also being used by the
companies to facilitate information sharing. The channel
alignment strategies to reduce BWE include: (1) the
application of VMI, (2) the application of Continuous
Replenishment Policies (CRP), (3) Consumer Direct Pro-
grams, and (4) offering discount for information sharing.
Many companies like Campbell Soup, Scott Paper,
M&M/Mars, Procter and Gamble (P&G), Nestle, Nabisco,
and Quaker Oats have adopted CRP. The significant names
of companies using VMI strategy include P&G, Apple, HP,
Motorola, and Texas Instruments. The companies like Dell
sell their products directly to their customers avoiding the
use of distribution channel, thereby reducing the number of
supply chain echelons in between, which, in turn, reduces
BWE. Many companies also offer discount through con-
tracts in exchange of information sharing or access to vital
information of the customers.
In order to increase operational efficiency to reduce BWE,
companies often use the following policies: (1) lead time
reduction and (2) echelon-based inventory control. “Echelon
inventory—the total inventory at its upstream and down-
stream sites—is the key to optimal inventory control” [19].
In case of “order batching” as the cause of BWE, the
strategies used by industry are: (1) use of EDI, (2) internet
ordering, (3) truck load considerations, (4) use of third-
party logistics (3PL), and (5) CAO.
A reason for large-order batches is the “high cost of placing
an order and replenishing it” [19]. Companies like GE,
Nabisco, and P&G use EDI and CAO to reduce both the cost
of paper work while ordering and replenishing stock and the
cost of other transactions. The cost of transportation is
another reason for ordering in large batches. Because of this
reason, companies find it economical to order full truckloads,
even if this strategy leads to infrequent replenishments from
Int J Adv Manuf Technol (2011) 54:1245–1261
the suppliers. The effort to increase order efficiency is
wasted completely because of ordering full truckloads. A
remedy is to order full truckloads of various products instead
of just one product. As a result, for each product, the order
efficiency and transport efficiency are preserved. P&G has
encouraged its distributors by offering discounts for ordering
in mixed Stock Keeping Units. The use of “Composite
Distribution” is another concept in industry for food products
or products which need different temperatures to be stored.
This can be made possible by making separate compartments
in a truck, each having different temperature suitable for
particular products. Since breaking order batches reduces
BWE and increases ordering costs at the same time, the use
of 3PL is thus observed in the industry. The use of 3PL has
the following advantages: (1) small batch replenishments
become economical, (2) allows economies of scale, (3) full
truckloads of products from different suppliers can be
realized. Sainsbury and Tesco in UK have used National
Freight Company for logistics [19].
In case of “price fluctuation” as the cause of BWE in
supply chain, industries generally use the following
strategies: (1) use of CRP, (2) application of Everyday
Low Price (EDLP), (3) Activity-Based Costing (ABC). The
purpose is to “reduce both the frequency and the level of
wholesale price discounting” [28]. Some of the companies
adopting EDLP policy include P&G, Kraft, and Pillsbury.
ABC is another strategy that helps the companies to know
about the excessive costs of forward buying and diversions.
This type of costing “provides explicit accounting of the
costs of inventory, storage, special handling, premium
transportation and so on” [19].
In case of “Shortage Gaming” as the cause of BWE,
companies like General Motors, HP, and Texas Instruments
allocate products based on past sales record or orders.
Companies also share sales, capacity, and inventory data by
making contracts among them. Besides, many companies
are in the endeavor to de-motivate retailers to exaggerate
their need and cancel orders by enforcing stricter returns
and cancelation policies.
However, BWE is caused basically by the lack of
coordination among supply chain partners. The lack of
coordination leads to improper, insufficient, inconsistent,
and distorted information that results order variability.
Thus, proper coordination among the supply chain partners
is the key to mitigate or eliminate BWE. Supply chain
contracts play a vital role in this regard. The type of
contracts depends on whether an organization adopts make-
to-order or make-to-stock policies [134]. Although some
research studies on supply chain contracts are observed in
the existing literature ([135–140]), the proper coordination
is still lacking among the supply chain partners. Some
supply chain partners are taking steps in mitigating BWE
through consignment stock or VMI. But, the problem still
1257
exists. Thus, research studies for finding new directions in
respect of supply chain coordination are needed.
6 Conclusion and further research issues
Bullwhip is one of the traditional problems in supply chain.
A large number of research studies in this area have been
observed in the existing literature. The overall research
studies on bullwhip fall into three categories: (1) factors
causing bullwhip; (2) quantifying bullwhip; and (3)
mitigating bullwhip. In this paper, we have reviewed only
the causes of bullwhip effect. The causes of BWE have
been categorized into: (1) Operational Causes and (2)
Behavioral Causes. A total of 16 operational causes and
three behavioral causes have been discussed in this paper.
Some of these operational causes are classified into further
subdivisions. Thus, we have presented a “classified” form
of the detailed review in this paper. We have also analyzed
the past research studies to show the gap of research at the
end of each subsection. These gaps of research indicate the
scope for further research studies in the respective field as
discussed in a particular subsection. We have also provided
directions to further research scope in this section in the
following paragraphs. We have also provided a brief
overview of the mitigation of BWE as obtained from the
existing literature, in section 5 of this paper.
We have observed that there are more factors whose
effects have not been studied. One such factor is the effect
of economic recession on bullwhip. The effect of recession
on BWE can also be an interesting and unearthed research
area in view of the recessive trend of the world economy.
Furthermore, since agent-based simulation has been
proved to be effective in terms of the supply chain
coordination, there is a need thus for more research studies
dealing with agent-based modeling.
Besides, there are some factors like order batching and
pricing, on which sufficient number of studies have not
been observed. Moreover, the effect of an integration of
more than two factors has not been observed in the existing
literature. For example, research studies on the integrated
effects of demand forecasting, order batching, and price
fluctuations under various replenishment policies will make
the researchers visualize the scenarios, since, in reality,
more than one factor causes BWE. The integrated effect of
at most two causes has been observed in the literature.
Moreover, most research studies have considered only
two-stage supply chain while developing their model. The
complex network structure of a supply chain or the multiple
stages of a supply chain has not been considered in the
existing literature.
Another well-practiced way of coordination among the
supply chain partners is the use of “contracts”. The purpose of
1258
making contracts is to access or predict the inventory,
capacity, sales, and particularly to know the end-user demand
more accurately. Collaborative techniques to know the end-
user demand data may also be applied. For example,
manufacturers and distributors may negotiate through con-
tracts to know each other's capacity and demand data, thereby
facilitating more accurate prediction of demand data of end-
users. In a supply chain, each echelon's order is generally
based on their immediate customer's orders instead of the
actual end customer's demand. Thus, research studies on the
proposition of proper contract, considering the benefits of the
supply chain partners, are still needed.
Moreover, the structure of supply chain in countries like
India is complex, since the supply chains are spread
geographically throughout the whole country and have
many stages spread geographically over the various
regions. Measurement and mitigation of BWE in such
scenarios can be a challenging research area.
Besides, the variables in the real-world scenarios are
mostly fuzzy stochastic in nature. Thus, the fuzzy stochastic
orientation of the integrated causes of BWE can be a more
realistic research field which will make the mitigation of
BWE easier to implement, and the integrated effects can be
visualized by the researchers and supply chain practitioners
more easily.
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