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Flexibility and Amplification Measures in a Supply Chain Model

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Executive Summary

Flexibility in a supply chain is usually conceived as a consequence of the amplification of production, typically known as the bullwhip-effect. In this paper, the authors modeled pull, push and hybrid inventory management methods, considering an AR(1) stationary stochastic demand process. They show that for these cases, the production amplification results to be highly influenced by the flexibility policies implemented in the supply chain. In this paper, they demonstrate that flexibility (measured by the adjustment capability between production and demand rates, and the ordering responsiveness) should be viewed as one of the main causes - and not a consequence - of the bullwhip effect.

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