A Appendix The Bullwhip Effect

Underlying demand for diapers over a relatively short period of time, say a few monfhs, fends to be quite sfable, as one would predict— babies clearly go through them at a pretty steady rate, as any parent knows first-hand However, P G noticed that, although underlying consumer demand for Pampers was sfable, fhe orders from refailers to fheir wholesalers were more volatile than consumer demand, while orders from wholesalers to P G were more volatile still, and orders from P G to ifs suppliers were more volatile still. Indeed, the bullwhip effect is formally defined by fhis phenomenon, an increasing level of variabilify in orders af successive upsfream stages of the supply chain. 

Indeed, the method used to generate the demand forecast at each stage in the supply chain can have a significant impact on the stream of orders placed upstream. Vollmann et al. (2005) provide a simple example to demonstrate the existence of the bullwhip effect. This example is repeated here, with some extensions, and shown in Table 3.6. Specifically, we extend what is a 10-period example from Vollmarm et al. to 20 periods that cover two repeating cycles of a demand stream with slight seasonality. In addition, we institute a few policy rules (1) that orders must be non-negative, (2) that 

Bullwhip Example from Vollmarm et al. (2005) Altered for Minimum Order Size of 0 and Horizon of 20 Periods 

Bullwhip Example with Two-Period Lead Time 

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