Bullwhip effect model and analysis of a supplementary product in supply chains

The story of "Walmart Nappies and Beer" inspires researches to find the potential relationship between a focal product (or item/SKU) and some other products (we call supplementary products here) in a supply chain. How to reflect the dependent demand relationship between a supplementary product and a focal product is significant for supply chain management and operations management. This paper investigates the bullwhip effect of a supplementary product in a two echelon (wholesale-supplier) serial supply chain. With the assumption of a first-order autoregressive demand process of the focal product and order-up-to (OUT) inventory policy, the analytical quantitative model of bullwhip effect for the supplementary product is established based on the simple moving average. The deduced model is further compared with the model without the effect of focal products. The obtained managerial insights is that in order to reduce the bullwhip effect of a product in a supply chain, exploring and sharing the demand information about dependent products is a feasible way besides information sharing on various echelons.