A Simulation of Order Resonance Phenomenon in a Supply Chain Triggered by Reinforcing Loop

A supply chain as a system has many subsystems. The subsystems include retailers, wholesalers, etc. Croson and Donohue say that the Bullwhip effect (order resonance phenomenon) can be caused by decision makers, not by exogenous variable changes. The purpose of this study is to show the process of collapsing the supply chain by interaction between subsystems, each of which has a balance loop with delay and a reinforcement loop under the oligopolistic competition. For this purpose we made a system dynamics simulation model assuming the supply chain with a wholesaler and two retailers. We give this model a single stimulus, check the activation and the dominance of each loop, and observe how it affects the entire system. The results showed that a single minor stimulus could ignite and therefore distract the whole system. In this process, delay and reinforcing loop has a key role. This study also showed that the oligopolistic competitive supply chain can cause the resonance in order flow.