Impact of cross-docking on the bullwhip effect

Abstract

Purpose An important phenomenon often observed in supply chain, known as the bullwhip effect, implies that demand variability increases as we move up in the supply chain. On the other hand, the cross-docking is a distribution strategy that eliminates the inventory holding function of the retailer distribution center, where this latter functions as a transfer point rather than a storage point. The purpose of this paper is to analyze the impact of cross-docking strategy compared to traditional warehousing on the bullwhip effect. Design/methodology/approach The authors quantify this effect in a three-echelon supply chain consisting of stores, retailer and supplier. They assume that each participant adopts an order up to level policy with an exponential smoothing forecasting scheme. This paper demonstrates mathematically the lower bound of the bullwhip effect reduction in the cross-docking strategy compared to traditional warehousing. Findings By simulation, this paper demonstrates that cross-docking reduces the bullwhip effect upstream the chain. This reduction depends on the lead-times, the review periods and the smoothing factor. Research limitations/implications A mathematical demonstration cannot be highly generalizable, and this paper should be extended to an empirical investigation where real data can be incorporated in the model. However, the findings of this paper form a foundation for further understanding of the cross-docking strategy and its impact on the bullwhip effect. Originality/value This paper fills a gap by proposing a mathematical demonstration and a simulation, to investigate the benefits of implementing cross-docking strategy on the bullwhip effect. This impact has not been studied in the literature.