Providing a measure for bullwhip effect in a two-product supply chain with exponential smoothing forecasts

In this paper, a two-product and two-echelon supply chain is considered in order to quantify the bullwhip effect. Demands of the products are correlated and are represented by a first order vector autoregressive model. Retailer uses “order up to” ordering policy for replenishment of stocks and utilizes exponential smoothing forecast method to predict demand in lead-time period. According to the mentioned assumptions, an equation is derived for bullwhip effect measurement and then a numerical example is presented for a better perception of the bullwhip effect behavior when the parameters change. A comparison of the bullwhip effect measure has been done when two main forecasting methods i.e. exponential smoothing and moving average are used and empirical results are provided. At last, a cost analysis is conducted based on shortage and holding cost under different bullwhip effect