Delay Variability Compensation for Combating the Bullwhip Effect in Periodic-Review Inventory Systems with Multiple Suppliers

In this paper we provide a control-theoretic methodology for combating the bullwhip effect (amplification of demand variations in order quantities) in supply chain, where multiple supply alternatives are used for acquiring the stock at a goods distribution center. We propose a new policy which effectively combines the benefits of linear-quadratic (LQ) optimal control and disturbance compensation techniques for providing a smooth ordering signal. In addition, the designed policy ensures that demand is entirely satisfied from the on-hand stock (yielding zero lost-sales cost) and the warehouse capacity at the distribution center is not exceeded (which eliminates the risk of costly emergency storage). Robustness to time-varying delay and unknown, variable demand is strictly proved and verified numerically.