Empirical Assessment of Bullwhip Effect in Supply Networks

Abstract

Previous empirical studies on bullwhip effects treat each industry or firm as isolated from its supply chain network. In this paper, the authors are interested in the role played by supply chain relational connection in moderating how demand variability signal is transmitted upstream. The paper conducts an empirical study based on a panel data of 55 manufacturing industries and 9 wholesale industries. The regression analysis shows that demand variability is propagated through supply chain upward and the transmission is influenced by the structural relationship between suppliers and customers, which is measured by customer-base concentration and customer interconnectedness. On the other hand, customer demand variability has a greater impact on industries with less concentrated customer base or with less interconnected customers.