Value Analysis by Adopting Blockchain Technology to Mitigate Bullwhip Effect

In practice, the supply chain usually cannot effectively share information, which results in bullwhip effect. The emergence of blockchain technology has made it possible to share information in the supply chain, but it’s not sure how valuable to reduce bullwhip effect. This paper reveals the value of blockchain technology in reducing bullwhip effect within a one-manufacturer one-retailer supply chain under three approaches: no information sharing, data purchased by manufacturer, and information transparency system by adopting blockchain (BITS). The study shows that: (1) Manufacturer using blockchain to construct BITS can bring value and reduce negative impact of bullwhip effect, but the information transparency level isn’t as high as possible and they will choose BITS with fully transparent only when demand distortion is large; (2) The data purchase model doesn’t add value to the manufacturer when the cost of data buying is large, while the BITS construction model always does; Moreover, BITS model generates more value for manufacturer than data purchase model, when demand volatility and BITS construction cost are not large simultaneously; (3) If the retailer bears the BITS cost, then he prefers to actively share BITS cost rather than passively bear the cost when upstream information is less distorted.