Ranking Operational Causes of Bullwhip Effect in Supply Chain Using AHP: Perception of Managers in FMCG Sector

Abstract

Bullwhip effect (BWE), which refers to the phenomenon wherein the variance in demand orders increases as one moves up the supply chain (SC), has been a source of concern for most of the SC managers as it has serious implications in the SC. Problems can vary from inefficient ordering and inventory policies (IP) to higher total cost of SC with extreme cases of stock-out and disruptions in the SC. The literature on this topic suggests various factors which cause BWE and these have further been divided into two broad groups, namely, “operational causes” and “behavioural causes.” This study focuses on the operational factors identified through the survey of literature from 1990 to 2013 and suggests 18 factors which contribute to the BWE. Further, from an analysis of literature, based on a number of articles and their citations, and responses from field experts through a questionnaire, a refined list of seven factors has been taken up for the study. These factors have been ranked using the “analytical hierarchy process” (AHP). The ranking is based on pairwise comparisons based on the perception of the SC managers in the manufacturing sector in north India.

The article is divided into five sections. The first section deals with the introduction and identification of the BWE. The second section identifies the various factors which cause this effect under the two broad categories, namely, the operational and behavioural factors. The third section discusses AHP and the methodology used in the article to rank the operational factors. The fourth section presents the results in a tabular and graphical form. Order batching (OB) is found to be the biggest contributor of BWE in manufacturing sector in the aforementioned region followed by demand signal processing (DSP), lead time (LT), IP, price fluctuation (PF), lack of trust (LOT), and number of echelons (NOE). The fifth and final section undertakes a discussion and presents guidelines for future research.