Mitigating the bullwhip effect in supply chains using variance reduction techniques

This paper proposes a new strategy that can be unilaterally applied by the supplier in order to mitigate the bullwhip effect in its supply chain, especially where information sharing, vendor managed inventory (VMI), and other collaboration methods fail. This strategy is similar to the use of control variates in simulation analysis. It is shown in this paper that this control method can reduce the variance of individual retailer orders, and thus diminishes the aggregated impact of the bullwhip effect on the supplier. Surprisingly, this strategy also happens to enhance the service level to the retailer as well.