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Mitigating bullwhip effect in supply chains by engaging in digital transformation: the moderating role of customer concentration

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Abstract

The bullwhip effect in supply chains causes mismatches between demand and production, and the emergence of digital transformation offers a potential prominent avenue for firms to address this uncertainty. This study draws on the organizational information processing theory to investigate the impact of digital transformation on the firm-level bullwhip effect and how this relationship may be contingent on customer concentration. We empirically examined our hypotheses by using hierarchical linear modeling with multiple high-dimensional fixed effects on a large panel dataset of 2,159 listed Chinese manufacturing firms (8,540 firm–year observations) from 2016 to 2020. The results show that digital transformation significantly mitigates firms’ bullwhip effect. Moreover, customer concentration weakens the negative relationship between digital transformation and the bullwhip effect. Specifically, the negative effect of digital transformation on the bullwhip effect will be stronger in firms with a diffuse customer base. The present research findings provide important theoretical contributions to the supply chain and technology management literature and offer valuable practical implications for managers to minimize the bullwhip effect.

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Acknowledgements

This study was supported by the Humanities and Social Sciences Foundation of the Ministry of Education of China (Grant No. 21YJC630076). We gratefully acknowledge the insightful suggestions from the editors and the anonymous reviewers, which improved this article. We would also like to thank Zhilin Fan and Jing Luo for their research assistance, as well as other members of Star-lights Research Team for their comments on earlier versions of the manuscript.

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Authors and Affiliations

  1. Business School, Shandong University, Weihai, China

    Feng Liu

  2. Department of Logistics, Service and Operations Management, Korea University Business School, Seoul, 02841, South Korea

    Mingjie Fang

  3. Division of Business Administration, Sookmyung Women’s University, 100, Cheongpa-ro 47-Gil, Yongsan-gu, Seoul, 04310, South Korea

    Shufeng Xiao

  4. Macquarie Business School, Macquarie University, Sydney, 2109, Australia

    Yangyan Shi

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Liu, F., Fang, M., Xiao, S. et al. Mitigating bullwhip effect in supply chains by engaging in digital transformation: the moderating role of customer concentration. Ann Oper Res (2024). https://doi.org/10.1007/s10479-024-05908-7

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