Bullwhip severity in conditions of uncertainty: regional vs global supply chain strategies

Abstract

Purpose

Using a phenomenon known as the bullwhip effect, the authors explore why additional uncertainty in the marketplace can create severe disruptions in global supply chains (GSCs). The purpose of this paper is to analyze related risks in regional vs GSCs during low and high levels of uncertainty. The authors propose and discuss a number of potential implications alongside some tactics that may help mitigate disruptions in some cases before they become terminal problems for the supply chain sustainability.

Design/methodology/approach

Monte Carlo simulation is used to generate the conditions of uncertainty and various scenarios that may emerge to challenge GSCs. Vensim software is utilized as a tool for simulation purposes. The authors considered scenarios applicable to manufacturing and retail sectors specifically because of storability property of goods.

Findings

Regional supply chains, as opposed to global ones, are more stable and reliable (less risk of disruption) during low and high levels of uncertainty. During uncertain times, upstream suppliers are at greater risk in GSCs. Firms must make strategic decisions that will secure its supply chain functionality and assess the likelihood of such events since many firms entered emerging markets.

Originality/value

Building on internalization theory, it shows that risk and survival are components of decision making that are further complicated by supply chains now operating globally in emerging markets. The paper demonstrates with simulation that GSCs are riskier than regional supply chains in low and high levels of uncertainty, particular as it relates to the bullwhip effect. It also provides recommendations about supply chain restructure and investments in communication improvements to reduce the bullwhip effect in the supply chain.

Citation

Alvarado-Vargas, M.J. and Kelley, K.J. (2020), "Bullwhip severity in conditions of uncertainty: regional vs global supply chain strategies", International Journal of Emerging Markets, Vol. 15 No. 1, pp. 131-148. https://doi.org/10.1108/IJOEM-02-2017-0050