Stochastic Control of Bullwhip Effect in Supply Chain

As everyone knows the bullwhip effect, indicating that demand variability increases gradually when moving upstream through the supply chain. This effect affects the efficiency of inventory control, material flow and transportation in a supply chain. Based on literature [Baganha, M et al. (1998)], a multilevel model of supply chain is developed in this study to describe the bullwhip effect by applying a warp wave quantifying. Meanwhile the stochastic control strategy of bullwhip effect is developed. The idea of this method lies in the determination of optimal decisions of supply chain management in the case of stochastic demand variability. Simulation on stochastic control strategy of bullwhip effect with a petroleum distribution system is demonstrated, and the result shows that the bullwhip is reduce