Modelling and analysis of the bullwhip effect with customers’ baulking behaviours and production capacity constraint

Abstract

As the service is becoming the strategic preference of the manufacturing companies, bullwhip effect caused by customers’ baulking behaviours is a pervasive and enduring characteristic of supply chain management to be considered. Moreover, the interaction between customers’ baulking behaviours and capacity utilisation also has a great impact on bullwhip effect, which draws an important concern in supply chain research. To tackle this problem, we establish a system dynamics model and make a case study on a tool manufacturer in Shanghai, China. The customers’ baulking behaviours are represented as customers’ responses to variable service levels in this research. Firstly, the model is validated by comparing simulation results with practical data. Then, the oscillation characteristics of stochastic demand information distortions caused by customers’ baulking behaviours and capacity utilisation are analysed. Lastly, we show how the inventory and responsive utilisation strategies interact with each other in smoothing the bullwhip effect under such demand pattern. The model yields insights into the suitable inventory and responsive utilisation strategies with customer response to supply availability.

Keywords:

• bullwhip effect
• customers’ baulking behaviours
• production capacity constraint

Funding

This work was supported by Research Grant from National Natural Science Foundation of China [number 70932004]; Specialized Research Fund for the Doctoral Program of Higher Education [number 20090073110035], and the Scientific Innovation Research Fund of Shanghai Education Committee [09ZZ19].