Measuring Bullwhip effect in a pipeline 3-stage supply chain using moving average method for demand forecasting

Bullwhip effect، which is an undeniable phenomenon in a supply chain; imposes considerable negative impact on the performance and the effectiveness of the chain. There are varieties of causes known for the presence of this phenomenon، among which lack of accurate and in-time demand information as well as long lead times are of the most important ones. To manage the bullwhip effect، this factor needs to be measured accurately. In this paper considering a 3-stage supply chain consisting of supplier، warehouse and retail stages we propose a new method to quantify the bullwhip effect at the warehouse level. The method uses Moving Average (MA) technique to forecast the demand. This paper، using numerical examples، illustrates the performance of the proposed method to measure the bullwhip effect as well as to quantify order rate variance ratio (OVR) and inventory variance ratio (IV). It is also argued that the proposed method، due to its not using some simplifying assumptions، represents better accuracy as compared to some other existing bullwhip effect quantifying methods. The paper also represents the capability of the proposed method for the bullwhip effect sensitivity analysis with regard to the service level parameter.