Analysis of a Three-Stage Supply Chain with Level Constraints

Many companies have enjoyed a significant success due to the unique ways in which they have organized their supply chains, which are one of the best ways to compete in today's marketplaces. For make-to-stock production systems the production plans and activities are based on demand forecasting. This is one of the key causes of the bullwhip effect. The bullwhip effect (BE) is the inherent increase in demand fluctuation up the supply chain. In the paper we experimented (by simulating) with a special case of a simple three-stage supply chain using seasonal and deseasonalized time series of the market demand data in order to identify, illustrate and discuss the impacts of different level constraints on the BE. The results are presented for different overall equipment effectiveness (OEE) and constrained inventory policies. At higher OEE level there is less variability in production processes, but at inventory limitations the impact is more complex.