Beyond Inventory Management: The Bullwhip Effect and the Great Moderation
نویسنده
چکیده
We resurrect the question if improved business practices contributed to increased macroeconomic stability since the 1980s – the Great Moderation. While previous studies on the issue are limited to examining inventory management, we analyse the role of better supply chain management on enhancing firms’ ability to coordinate their production. By investigating ordering and backordering behaviour in the durables manufacturing sector, we find that the improved business practices have significantly dampened order volatility to the sector (the ‘bullwhip effect’), by around 40-50%. Using the stylised fact that the durables manufacturing sector is responsible for half of the overall Great Moderation, we determine that the contribution of better business practices is quantitatively significant, at 20-25% of the overall Great Moderation. JEL Classifications: E32, L60
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