Order Batching and the Bullwhip Effect Reduction in a Cross-Docking Strategy

Abstract:The purpose of this article is to analyze the effect of order batching on the bullwhip effect in a cross-docking strategy. The model proposed uses simulation to analyze empirically the impact of order batching on the bullwhip effect in cross-docking strategy compared to traditional warehousing. The study is based on a case study of a fast-moving consumer goods company and a French retailer. In the model, a three-stage supply chain composed of one supplier DC, one retailer DC, and 10 retailer stores is considered. The order-up-to (OUT) level policy is used to control inventory at each stage. The demand is forecasted using a simple moving average scheme. The empirical investigation shows that the use of cross-docking leads to a bull-whip effect gain upstream in the supply chain in all cases and situations. Moreover, we show that there exists a high positive correlation between the physical volume of a product (measured by the number of items per pallet) and the bullwhip effect gain. Finally, the increase in lead time to the stores has little impact on the bullwhip effect gain upstream in the supply chain.