Mitigating the bullwhip effect by reducing demand variance in the supply chain

To coordinate an agile manufacturing system with the high-level requirements of marketing services, supply chain management (SCM) plays an important role in management activities for enterprise globalization. In SCM, a phenomenon called the bullwhip effect has attracted considerable attention. Beyond the previous studies, we consider multiple retailers with one supplier in the supply chain and examine ways in which the supplier can reduce the total demand variance by adjusting retailers' order sizes. The results reveal that the total demand variance can be reduced by using portfolio theory to adjust the order sizes based on the variance of order of the retailer. Therefore, the bullwhip effect can be partially reduced by our proposed method.