Title: Supply Uncertainty and the Reverse Bullwhip Effect
 
Abstract:
 
We first discuss the effects of both demand and supply uncertainty in
multi-echelon supply chains. We demonstrate that, in many cases, the
optimal strategy for coping with supply uncertainty is exactly opposite
to the conventional wisdom from the OM literature on coping with demand
uncertainty. Using a combination of analytical and simulation studies,
we illustrate this contrast in various settings, including risk pooling,
inventory placement, supplier diversification, and others.
 
We then present theoretical and empirical evidence for a reverse
bullwhip effect (RBWE) that occurs in a variety of situations involving
supply uncertainty. In the RBWE, order volatility increases as one moves
downstream in the supply chain. This is the opposite of the classical
bullwhip effect, which is generally associated with demand uncertainty.
We examine causes of RBWE, discuss its impact, and suggest strategies
for mitigating it.
 
 
 
Bio:
Zuo-Jun (Max) Shen received his Ph.D. from Northwestern University. He
has been active in the following research areas: integrated supply chain
design and management, market mechanism design, applied optimization,
and decision making with limited information. He is currently on the
editorial/advisory boards for several leading journals. He received the
CAREER award from National Science Foundation in 2003.