Modeling and analysis of cash-flow & material bullwhip effect in serial vs convergent vs divergent Supply chain network

Bullwhip effect in the supply chain is a phenomenon which can emerge in both inventory levels and replenishment orders. The material Bullwhip effect not only disrupts the multi-echelon inventory level but also causes variations in cash conversion cycle (CCC) across cash flow of supply chain which can lead to a cash crunch for business operation and affect the whole financial balance. As a result, it can lead to inefficiencies such as cash flow bullwhip (CFB). Due to the delay in cash flow cycle throughout the supply network, it can affect the efficiency of supply chain management. Hence there is a huge importance of studying the cash flow bullwhip behaviour under different supply chain networks with the material bullwhip. It is also necessary to understand how cash flow bullwhip propagates to upper stages of the network as compared to the phenomenal material bullwhip. This paper aims to analyze the accuracy between proposed CFB -AR formula and existing CFB-T formula from (R.Tangsucheeva et al.,2013) and to verify both the result under two cases (variance and shock). Also, another parameter will be to study the material bullwhip under all the three SCN. As a first step, we develop a system dynamics structure as a simulation model which includes multi-stage supply chain under serial, centralized and decentralized supply chains. Then, to study the bullwhip effect, we consider two lenses as variance and another one as shock lens (impulse in demand). We measure the CFB and material bullwhip at all the four different levels such as the retailer, distributor, manufacturer, supplier of SCN. To measure the overall performance between any two types of the SCN with respect to each echelon level, we calculate the delta. Therefore, higher the delta value more will be the difference between SCN behaviour at that echelon. Also, to measure overall propagation of bullwhip effect between any two selected SCN we measure the bullwhip slope (here not considering each echelon instead considering the complete SCN). We also perform the comparative analysis to study the bullwhip behaviour between each echelon of the particular SCN. This is done by dividing the time period as a set of 7 time periods, where the shock occurs at the first time period of each echelon named as T1 period under shock lens. The final observation noted were as follows, the proposed calculation for the cash flow bullwhip –(CFB-AR) has similar behaviour to the material bullwhip, also serial and convergent has similar and stable bullwhip propagation to the upper level. Whereas divergent SCN has the abrupt effect of demand shock which propagates adversely at upper echelons. The CFB has higher y-axis range which means the demand shock has worse effect in cash flow as compared to the material bullwhip, which signifies risk of encountering cash crunch due to the loss of a sale or overhead inventory holding cost.



Work Title Modeling and analysis of cash-flow & material bullwhip effect in serial vs convergent vs divergent Supply chain network
Penn State
  1. Vishal Kumar Singh
  1. cash flow bullwhip
License All rights reserved
Work Type Research Paper
Deposited April 07, 2020




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