Research Manuscript: The Bullwhip Effect in Rule-Based Supply Chain Planning Systems: A Case-Based Simulation at a Hard Goods Retailer

Abstract The vision of a well-integrated supply chain (SC) was developed as early as 1958 by Forrester, who addressed what would eventually be called the Bullwhip Effect (BWE). The Flowcasting concept, originally called Retail Resource Planning, was proposed to connect all SC upper tiers to the storefront through fulfillment logic based on the Distribution Resource Planning (DRP) system. This method can therefore be understood as fully or SC-wide integrated DRP with a focus on the role of retailers instead of that of vendors or distributors. We studied a Canadian retailer that implemented Flowcasting in order to gain insight into the benefits and operational logic of this system. Based on the data obtained from the company, we simulate Flowcasting operations across a 3-tier SC compared to the Reorder Point (ROP) system, which was previously used at the firm, as well as a combination of ROP and DRP (ROP/DRP or partially integrated DRP), which are some of the most common implementations in use. The simulation is configured based on the company's settings, including historical average demand, demand estimates, lead time, etc. Then, multivariate regression is deployed to statistically compare the efficacy of these methods in SC management using various assessment criteria, including BWE measures. The results show that the requirement calculation logic used in an SC-wide integrated DRP system (Flowcasting) generally outperforms the other two approaches, and its benefits in curtailing the BWE become more noticeable in the upper tiers of the SC. This paper indicates the enormous potential of SC-wide integrated DRP logic in rule-based replenishment planning systems.