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Does the bullwhip matter economically? A cross-sectional firm-level analysis
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Baron, O., Callen, J. L. and Segal, Dan (2023) Does the bullwhip matter economically? A cross-sectional firm-level analysis. International Journal of Production and Economics, 259 . 108814. doi:10.1016/j.ijpe.2023.108814 ISSN 0925-5273.
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Official URL: https://doi.org/10.1016/j.ijpe.2023.108814
Abstract
One of the critical factors that impacts outsourcing decisions in supply chains is the bullwhip effect (BE). This effect refers to the ubiquitous phenomenon whereby firm-level production is more volatile than its demand. The literature assumes that the BE increases costs and reduces profitability. We examine the relations between the intra-firm BE and various accounting/financial performance measures using a large panel of cross-sectional firm-level data. Our analyses yield results that are inconsistent with the notion that the BE has significant negative consequences for profitability at the firm level. Specifically, we find almost no significant (statistical/economic) negative relation between accounting/market measures of profitability and the bullwhip at the firm level. Our results hold even after accounting for the endogeneity of the bullwhip using advanced matching techniques and a natural experiment (the Fukushima disaster). These results suggest that either the BE has little effect if any on profitability at the firm level, or that the BE is a natural outcome of firms’ optimization strategy and need not be actively managed.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management |
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Divisions: | Faculty of Social Sciences > Warwick Business School > Accounting Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Business logistics -- Contracting out, Business logistics, Contracting out, Decision making, Supply and demand | ||||||||
Journal or Publication Title: | International Journal of Production and Economics | ||||||||
Publisher: | Elsevier | ||||||||
ISSN: | 0925-5273 | ||||||||
Official Date: | May 2023 | ||||||||
Dates: |
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Volume: | 259 | ||||||||
Article Number: | 108814 | ||||||||
DOI: | 10.1016/j.ijpe.2023.108814 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Date of first compliant deposit: | 15 February 2023 | ||||||||
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