Demand Modeling of a Fine Paper Supply Chain in a Quest to Reduce the Bullwhip Effect

K.-M. Björk, A. Hejazi, and C. Carlsson (Finland)


Demand Modeling, Supply Chain Management, Bullwhip Effect


Measuring the Bullwhip effect is a common thing to do when condition of a supply chain is wanted. Finding the Bullwhip effect is often not a problem, but the degree of it can often be manipulated to show the desired results. It is important to use the data obtained with caution, since the aggregation level of time, products and markets can influence the degree of Bullwhip significantly. When the supply chain is wanted to be simulated, the demand model needs to be determined. In many cases it is assumed that a simple autoregressive model (AR(1)-model) of the first degree should be used. But is this an appropriate model of the demand? In order to answer this question a Time Product framework is being considered to logically divide data into different aggregation levels. To illustrate the possibilities with the framework, data from a fine paper distributor in Finland is used as illustration of both the Bullwhip effect and the suitability of a simple AR(1) model as the demand in a simulation / forecasting environment.

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