The Linear Control Theory for Counteracting the Bullwhip Effect

Abstract

This paper shows how to reduce the bullwhip effect by the linear control theory. First of all, the methodology of the supply chain and the bullwhip effect is given based on control engineering insights. By describing the sequence of events and analyzing of the transfer functions, a new stock policy which bases orders on the inventory position at an installation is given. The results are proved by analyzing stability, the aggressive ordering, white-noise order amplification, worst-case order amplification and numerical results.