A control theoretic analysis of the Bullwhip effect under triple exponential smoothing forecasts

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Abstract

In this paper, we study the performance of an Automatic Pipeline, Variable Inventory, Order-Based Production Control System (APVIOBPCS) using linear control theory. In particular, we consider a system with independent adjustments for the inventory and pipeline feedback loops and the use of triple exponential smoothing (the Holt-Winters no-trend, additive seasonality model) as a forecasting strategy. To quantify the performance of the system, we derive the transfer functions of the system and plot the frequency response of the system under a number of different parametrizations. We find that the system using Holt-Winters forecasting (the HW-model) significantly outperforms the system using simple exponential smoothing (the SES model), commonly found in the literature, under certain demand assumptions. However, we find that the HW-model is very sensitive to the demand frequency, while the SES is very robust. Thus, the performance range is substantially narrower for the SES model. Finally, we show that previous insights related to behavioral biases are not affected by the choice of forecasting strategy.

Original languageEnglish
Title of host publicationInternational Conference of Numerical Analysis and Applied Mathematics, ICNAAM 2017
PublisherAmerican Institute of Physics
Number of pages4
ISBN (Electronic)9780735416901
DOIs
Publication statusPublished - 10 Jul 2018
Event15th International Conference of Numerical Analysis and Applied Mathematics (ICNAAM 2017) - Thessaloniki, Greece
Duration: 25 Sep 201730 Sep 2017
Conference number: 15

Publication series

NameAIP Conference Proceedings
Volume1978

Conference

Conference15th International Conference of Numerical Analysis and Applied Mathematics (ICNAAM 2017)
Abbreviated titleICNAAM 2017
CountryGreece
CityThessaloniki
Period25/09/1730/09/17

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