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

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.