Cognitive Mapping, System Dynamics and the Bullwhip Effect

Lead Research Organisation: University of Salford
Department Name: Unlisted

Abstract

This project deals with the problem of the Bullwhip effect, i.e. that of magnifying inventories as we move backwards in a supply chain. This effect has been highlighted in the academic literature for many decades and, admittedly, it has attracted a tremendous amount of scientific research. However, all the relevant projects have focused on only a limited number of the contributory factors, with no integrative model having yet been established. Despite the importance of such work for developing our understanding of the behaviour of supply chains, the problem still prevails in industrial applications. The fragmented approach to the relevant problem solving may well be explained in terms of the considerable associated complexity. That is to say, the contributory factors (e.g. demand signal processing, rationing/shortage gaming, order batching and price fluctuations) have to be viewed as interrelated components (as they are in practice) rather than stand-alone issues of a wider formulation, and this obviously increases the theoretical complexity of the problem. Analytical solutions cannot be developed unless some of the factors that contribute to the effect are isolated and tackled separately. In addition, and in order to facilitate the mathematical treatment of the problem, many assumptions need to be made, the validity (or universal applicability) of which has also been questioned. It is viewed as imperative to introduce novel holistic approaches in order to solve complex supply chain/ inventory problems, such as the Bullwhip effect. These complex problems demonstrate the industrial importance of inventory management and the considerable benefit that their solution may offer to modern organizations. Such a solution necessitates an inter-disciplinary approach to problem formulation and modelling and this is what out proposal introduces. There is evidence to suggest that the integration of System Dynamics models and cognitive maps constitutes a very promising approach to group model building and is particularly appropriate for supply chain models with significant behavioural components. The aim of this dedicated 3-month project is to re-conceptualise the complex problem of the Bullwhip effect through the integration of Cognitive Mapping and System Dynamics (stock and flow) modelling. Such an approach allows for the consideration of behavioural factors in addition to exploring interactions. Two such factors are highlighted in our research: i) judgemental changes to forecasts and ii) judgemental changes to replenishment orders. Both have been shown to prevail in industrial practices and they are appropriately incorporated in our models. In addition to researching the extent to which such models represent reality, we also intend to explore their potential to act as a training tool for those new to judgemental forecasting and, in the longer term, to change company policies.

Publications

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Syntetos A (2017) Judgement and supply chain dynamics in Journal of the Operational Research Society

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Syntetos A (2017) Judgement and supply chain dynamics in Journal of the Operational Research Society

 
Description This was the first project to model and assess (in a way other than a laboratory experiment) the implications of judgementally adjusting inventory replenishment decisions. The project provided important managerial insights into the implications of adjusting replenishment decisions and statistical forecasts in a supply chain context.
Exploitation Route In the design of better forecast support systems (that facilitate a more constructive intervention of humans into statistically derived decisions such as foecasts or replenishment orders).
Sectors Aerospace, Defence and Marine,Electronics,Manufacturing, including Industrial Biotechology,Retail

 
Description The findings have definitely motivated further scientific research in this area. We are not aware of any amendments of existing software (yet) based on the research we have conducted.
Sector Other
Impact Types Policy & public services

 
Description BAE Systems 
Organisation BAE Systems
Country United Kingdom 
Sector Academic/University 
PI Contribution Enabling the participating organisation to obtain insights into how judgement interacts with statistical decision making in inventory and supply chain management.
Collaborator Contribution Data provision and contribution to focus group meetings for the construction of cognitive maps.
Impact A major paper was published by the Journal of the Operational Research Society - and this is listed in the outputs of this project.
Start Year 2009
 
Description Brother International Europe Limited 
Organisation Brother Industries
Department Brother International Europe
Country United Kingdom 
Sector Private 
PI Contribution Enabling the participating organisation to obtain insights into (and amend their solution on): i) demand classification for logistics purposes, ii) forecasting of service parts requirements; iii) the way judgement interacts with statistical decision making in inventory and supply chain management.
Collaborator Contribution Data provision, participation in focus group meetings, informal discussions on the development of solutions.
Impact A major joint publication in the International Journal of Operations and Production Management. Details are provided under the outputs of this project.
Start Year 2006
 
Description Valves Instruments Plus Ltd 
Organisation Valves Instruments Plus Ltd
Country United Kingdom 
Sector Private 
PI Contribution Enabling the participating organisation to obtain insights into (and amend their solution on): i) demand classification for logistics purposes, ii) demand forecasting; iii) stock control methods being used; iv) the way judgement interacts with statistical decision making in inventory and supply chain management.
Collaborator Contribution Data provision, discussions and interviews, participation in focus group meetings.
Impact A joint publication in the International Journal of Production Economics - full details are given in the outputs of this project. It is important to note that the Principal Investigator was conducting a KTP project at that time with this organisation and synergies between the KTP and the EPSRC project were fully exploited.
Start Year 2006