What is Order Rate Variance Ratio

This chapter discusses the bullwhip effect performance of serial and divergent supply chains under statistical process control (SPC)-based and order-up-to (OUT) policies. The performance of the supply chains is evaluated in terms of order rate variance ratio and bullwhip slope under four realistic customer demand models such normal, normal with a sudden change in mean, normal with seasonality, and normal with seasonality and a sudden change in mean. The impact of sharing of customer demand among the other members of the supply chain and the introduction of order smoothing parameter on both policies are also studied. The results show that under non-stationary customer demand models the difference in the performance of serial and divergent supply chains is noticeable. The bullwhip slope under OUT policy is significantly differing from the bullwhip slope under the SPC-based policy. OUT policy with order smoothing performs better than the SPC-based policy with order smoothing. This finding provides proper guidelines for a supply chain manager to make a decision in a practical scenario.