Doctoral Dissertation Research: Can Efficient Learning Mitigate the Bullwhip Effect?

Pennsylvania State Univ University Park, University Park PA

Investigators

Abstract

The proposed research studies the effect of several training protocols and coordination opportunities on the nature of the orders made in and the performance of multi-echelon serial supply chains. Specifically, we investigate the extent to which system-wide training and team communication help mitigate the "Bullwhip Effect", the observation that the variability of orders in supply chains increases as one moves closer to the source of production. This phenomenon, documented both in the field and in the laboratory, is prevalent, persistent and costly to both firms and consumers, and cannot be fully explained by standard theories. To examine the impact of training and communication, we employ the well-known "Beer Distribution Game" in which experimental subjects assigned the role of a retailer, a wholesaler, a distributor or a manufacturer in a serial supply chain strategically interact -- ordering and shipping beer to meet customer demand over multiple periods. We will compare trained subjects' decisions and supply chain performance in the standard baseline case where individuals formulate their strategies independently with two other treatments. In the system-wide training condition, participants first obtain a learning experience as a central planner who makes ordering decisions for the whole supply chain and is able to observe the immediate system-wide outcome of her actions. In the team communication condition, participants from the same supply chain are encouraged to discuss team strategies prior to the game. We expect the bullwhip effect to be reduced in both conditions. We will further examine the performance of each approach under different demand scenarios. Previous work has explored the impact of internal or operational innovations such as sharing point of sale information on supply chain performance, However, essentially all prior work uses naive participants with no or little training experience and prevents communication. Our work will have broad impact to the extent that it will provide a much-needed test of whether human resource activities like training and communications will enhance individual learning and behavior and improve system performance in real-world supply chains as well as other dynamic decision tasks involving delays and multiple participants.