A model to quantify the Bullwhip Effect in systems with stochastic demand and lead time

The increase in demand variability as information flows from customers to manufacturers in a supply chain is known as the Bullwhip Effect (BE). Modeling this phenomenon is key in measuring its intensity, aiming at reducing its negative impact on both service and inventory levels in supply chains. This paper proposes a new, more precise mathematical model for quantifying the BE in systems with stochastic demand and lead time. The new model takes into account the lead time variability. In addition, the model allows a more precise assessment of the role that the demand¿s coefficient of variation plays when quantifying the BE. The use of the proposed model may enable an improved management of the supply chain by attenuating the propagation of the BE.