Flexibility and Amplification Measures in a Supply Chain Model

Flexibility in a supply chain is usually conceived as a consequence of the amplification of production, typically known as the bullwhip-effect. In this article we modeled pull, push and hybrid inventory management methods, considering an AR(1) stationary stochastic demand process. We show that for these cases, the production amplification results to be highly influenced by the flexibility policies implemented in the supply chain. In this context, we demonstrate that flexibility (measured by the adjustment capability between production and demand rates, and the ordering responsiveness) should be viewed as one of the main causes - and not a consequence - of the bullwhip effect. This is relevant for chain managers since controlling the flexibility of the chain will also let them control the amplification. We also found an analytical relation between amplification and adjustment degree, showing that the amplification acceptability constraint introduced by Muramatsu can be accomplished by controlling the flexibility dimension described before. Weak and strong flexibility conditions are proposed. We show that the weak condition ultimately does not depend on the demand autocorrelation coefficient, whilst in the strong condition the ordering responsiveness, measured by lead time, may be modulable by the adjustment degree, both in push and hybrid methods. Thus, the supply chain manager is enabled to increase or decrease the lead time just increasing or decreasing the adjustment, respectively, always satisfying the Muramatsu criteria.