A Note on the Simple Exponential Smooth Non-optimal Predictor, the Order-up-to Policy and How to Set a Proper Bullwhip Effect

Abstract : The literature concerning the bullwhip effect is mostly focused on determining expressions for the theoretical bullwhip measure given specific theoretical system setups, whereas it must also be of interest to deal with the problem of how in fact to make a proper choice as to a sensible bullwhip level. Such a management approach to the bullwhip phenomenon has to be of quite some importance, as the bullwhip effect on the one side definitely is a system malfunction, but on the other also an effect the size of which common intuition tells us should be possible to control. The control is based on a decision as to what variation in demand should be locally absorbed and what variation should be passed on upstream. This paper will focus on design aspects of a bullwhip control policy in order to decide on sensible trade-offs between the bullwhip level and the local inventory variability.