The implications of COVID-19: Bullwhip and ripple effects in global supply chains

Using the financial proxies in the efficient market hypothesis (EMH), we explore how the bullwhip effect (BWE) and ripple effect (RE) have been affected by the COVID-19 pandemic upstream and downstream. We developed two models to help us understand the phenomenon. The first model we created was the global airline stock index (GASI). This index represents all the global airline companies in the sample in one single node. We compared the GASI with each sample's buyer and supplier. The first result we observed was that some companies are more affected than others. We also found that the RE increased after the COVID-19 pandemic, but not the BWE. We then created a second model to analyze the difference in effects between companies. This reveals that the number of relationships in the supply chain network is positively related to the BWE and the RE. According to the regression analysis, the data also show that companies with a higher degree of operating level (DOL) and debts, and a lower share price, are the most vulnerable to the BWE and RE. We close by summarizing our findings and discussing future research opportunities.

Automated summary

Using the financial proxies in the efficient market hypothesis (EMH), this study explores the impact of the COVID-19 pandemic on the bullwhip effect (BWE) and ripple effect (RE) in the supply chain upstream and downstream. Two models were developed to analyze this phenomenon, revealing that some companies are more affected than others and that the RE has increased after the pandemic while the BWE has not. The analysis also demonstrates a positive relationship between the number of relationships in the supply chain network and both the BWE and RE. Regression analysis further indicates that companies with a higher degree of operating level and debts, as well as a lower share price, are the most vulnerable to the BWE and RE.