The influence of decision patterns of inventory control on the bullwhip effect based on a simulation game of a production network

Abstract

The bullwhip effect leads to instabilities in supply chains. Research on this phenomenon stresses the normative approach. This means that the causes of the bullwhip effect are identified within the structure and processes of the supply chain. However, the bullwhip effect persists even when the operational causes are under control, or when demand information is stationary and known to all parties. Most of all, the influence of behavioural decision making on the bullwhip effect has been underestimated. This is why the article focuses on this aspect by resorting to a simulation game, the supply net game, for learning inventory control. The experimental results, involving 130 participants, show that the decision pattern of counterintuitive decision making produces what it is thought to lessen, namely the bullwhip effect. This happens whenever the participants restrain from ordering while backlogs are building up or whenever the participants continue to order while stocks are booming. A new countermeasure to this effect in a production network is the integration of the production plans of the manufacturers to the entire production load through collaboration.

Keywords:

• bullwhip effect
• inventory control
• production network
• simulation game

Acknowledgements

This research was funded by the German Research Foundation (DFG) within the project DFG SCHO 540/14-1. Moreover, the authors thank the reviewers for their valuable and precious comments.