Optimizing Ordering Policies for Bullwhip Effect Mitigation in a Simple Supply Chain Within the Framework of Industry 6.0

Abstract

The advent of Industry 6.0 has ushered in a new era of smart and interconnected manufacturing, posing both challenges and opportunities for supply chain management. The bullwhip effect is a significant problem observed in forecast-driven supply chains and is the major cause of disturbance in a supply chain. The bullwhip effect, or the whiplash effect, amplifies demand forecast variance as the echelons of the supply chain increase. Optimization of ordering policy is one important way of suppressing BWE. In this work, an ordering policy optimization model based on Sterman's model has been proposed. In the proposed model, new factors based on demand-forecast pattern, in conjugation with stock adjustment and supply lag adjustment, and mathematical formulation for enumeration of these factors, have been introduced to optimise the ordering policy. A comparative study of the proposed model with various existing models has also been presented to highlight its effectiveness.