The Bullwhip Effect: Concretization of Entropic Information Dissipation in Supply Chain Systems

Abstract

Supply chains represent complex and dynamic systems that incorporate autonomous firms interacting with one another to fulfill a common goal, while insuring their own ones. These firms’ behaviors are considered to be non-linear and sometimes unpredictable. This makes information transfer in the supply chain complex and causes instability when information transferred is incomplete or incorrect. This instability is characterized by the Bullwhip Effect that represents concretization of entropy, namely the degree of disorder within a system. In this paper we develop a new analytical approach assuming that the bullwhip effect is a consequence of the entropy of the supply chain system that is represented by information dissipation.

Keywords

• Bullwhip Effect
• Information Dissipation
• Supply Chain System
• Entropy