Analysis of capacity constraints on the backlog bullwhip effect in the two-tier supply chain: a Taguchi approach

Abstract

This paper investigates the impact of capacity constraints and safety stock on the backlog bullwhip effect in a model of a two-tier supply chain. One of the most commonly applied methodologies to study the various aspects of the Beer Game model is the control theoretic technique. It is clear that these control theoretic models are linear and cannot deal with non-linearities, such as capacity constraints. Thereafter, simulation experiments together with Taguchi design of experiments are performed to study non-linear impacts of capacity constraints in a two-tier supply chain. This research gives supply chain operations’ managers and designers a practical way to develop a trade-off between capacity and safety stock at different echelons and to take better decisions about their capacity and safety stocks. Future work should investigate the total cost implications of capacity constraints and safety stocks in a multi-echelon supply chain.