On Inventories and the Bullwhip: A Chicken and Egg Situation

Abstract:

In this paper, we explicitly look at the role of inventories as drivers of decision making through an empirical study using firm-level secondary data. Using COMPUSTAT data, we construct a database of supplier-customer pairs and study how downstream inventory decisions affect upstream purchase decisions.
We find support for our hypothesis that manufacturers systematically overreact to downstream inventory changes. Furthermore, we study the origin of said inventory changes through a structural model of the decision-making mechanism and find evidence that firms continuously adapt their safety stocks; the data is consistent with rational decision-makers that vary their cost structure according to the economic and financial conjuncture.

About the Presenter

Maximiliano Udenio is a PhD. Student at the OPAC group in the School of Industrial Engineering and Innovation Sciences of the Eindhoven University of Technology(TU/e), Eindhoven, The Netherlands. He holds an MSc in Industrial Engineering from the Buenos Aires Institute of Technology (ITBA) and a design Masters (PDEng) in Logistics Management Systems also from the TU/e. His research focuses on disentangling the effect of inventories on different aspects of supply chainn performance, mainly through the use of different methodologies to study different facets of the Bullwhip Effect.

More info about Maximiliano Udenio

About the Seminar

The KLU research seminar series is a regular meeting of PhD students, Post-Docs and professors who conduct research in the field of logistics and supply chain management. The research seminar is open to the public and we happily welcome guests.