Impact of supply chain bullwhip on cash flow forecast

Cash flow forecasting is very important for successful cash flow management for all supply chain partners and it becomes especially critical when there is shortage of credit or liquidity. Accurate cash flow forecasting can be limited by several factors such as data collection, payment uncertainty, and fluctuations in market demand. It is known that the bullwhip effect in a supply chain can cause wide fluctuations in upstream demand, an undesirable phenomenon that undermines supply chain's performance. In this paper we explore the impact of inventory bullwhip on the cash flow bullwhip (CFB) and consequently on the cash flow forecast. A combination of a Markov chain and exponential smoothing technique proposed by Corcoran is used as the forecasting technique in this paper. A simulation experiments are used to analyze the forecasting accuracy at different stages of supply chain and at different intensity of bullwhip effect.