Systems Thinking Solving Bullwhip Effect in Supply Chain: From the Perspective of System Dynamics

Based on the principles of System Dynamics, this paper discusses the causes of the bullwhip effect and possible approaches to controlling it, from the perspective of the dynamic mechanism of the supply chain. This paper takes as example the beer game, each outcome of which show a surprisingly similar bullwhip effect, regardless of who plays the game and when. The only explanation of this is the unstable structure of the beer game system that leads to the bullwhip effect. This paper suggests that this unstable structure is caused by controllable delays - ordering cycle - being smaller than uncontrollable delays - lead time within the whole chain. Looked into are the two most straight forward solutions, increasing ordering cycle and making full use of en-route inventory information, and why the former is difficult to implement.