Journal article
The Impact of the Bullwhip Effect on Sales and Earnings Prediction Using Order Backlog
Contemporary accounting research, v 35(2), pp 1140-1165
01 Jun 2018
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
Recent work in the supply chain literature suggests that the variance in orders placed with suppliers will be larger than that of sales to buyers. This distortion in demand information increases as it is passed along the supply chain from customers to upstream suppliers and has been referred to as the bullwhip effect. In this paper, we argue that the bullwhip effect reduces the ability of order backlog to predict future sales and earnings for upstream suppliers. Results obtained from our empirical analysis support this proposition. We find that the impact of bullwhip on the predictive ability of order backlog is further accentuated in firms with longer operating cycles. Market intermediaries such as financial analysts, on average, are unable to fully account for differences in the predictive ability of order backlog. However, analysts belonging to employers that follow all firms in a vertical supply chain do a better job of understanding the impact of bullwhip on the predictive ability of order backlog. In additional tests, we find that the bullwhip effect also impedes the ability of inventory components to predict future sales and earnings.
L'incidence de l'effet coup de fouet sur la prediction des ventes et des benefices au moyen du carnet de commandes Les travaux de recherche recents sur la chaine d'approvisionnement semblent indiquer que la fluctuation des commandes passees aupres des fournisseurs est plus importante que celle des ventes realisees aupres des acheteurs. Cette distorsion dans l'information relative a la demande, que l'on appelle << effet coup de fouet >>, augmente a mesure qu'elle remonte la chaine d'approvisionnement, des clients jusqu'aux fournisseurs en amont. Selon les auteurs, l'effet coup de fouet reduit la mesure dans laquelle le carnet de commandes permet de predire les ventes et les benefices futurs pour les fournisseurs en amont, une proposition que viennent appuyer les resultats tires de leur analyse empirique. Les auteurs constatent que l'incidence de l'effet coup de fouet sur les proprietes predictives du carnet de commandes est plus marque dans les societes dont les cycles d'exploitation sont plus longs. En moyenne, les intermediaires du marche comme les analystes financiers sont incapables de tenir parfaitement compte des variations dans les proprietes predictives du carnet de commandes. Toutefois, les analystes travaillant pour des employeurs qui suivent toutes les societes d'une chaine d'approvisionnement verticale comprennent mieux l'incidence du coup de fouet sur les proprietes predictives du carnet de commandes. En procedant a des tests supplementaires, les auteurs constatent que l'effet coup de fouet affecte egalement les proprietes predictives des articles de stock en ce qui a trait aux ventes et aux benefices futurs.
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Details
- Title
- The Impact of the Bullwhip Effect on Sales and Earnings Prediction Using Order Backlog
- Creators
- Hsihui Chang - Drexel UniversityJengfang Chen - Macquarie UniversityShu-Wei Hsu - Tunghai UniversityRaj Mashruwala - University of Calgary
- Publication Details
- Contemporary accounting research, v 35(2), pp 1140-1165
- Publisher
- Wiley
- Number of pages
- 26
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Accounting
- Web of Science ID
- WOS:000440413200020
- Scopus ID
- 2-s2.0-85047533920
- Other Identifier
- 991019168999904721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance