New perspectives on the bullwhip effect

Official URL: http://192.168.1.20/record=b1306619 (Table of Contents)

In this thesis, we propose a modified version of the Beer Game with two participants at each echelon that have conflicting incentives regarding the order decision. One participant (the sales manager) has backorder cost as his performance measure, whereas the other (the supply manager) has inventory holding cost. We conducted beer game experiments with human participants using the modified and standard game settings. We find that the conflict in the modified game, which reflects the sales/operations conflict in real firms, can dampen the bullwhip effect. We also develop multiple linear regression models to explain participants' order decisions based on factors including incoming demand, backlogs, on-hand inventory levels and outstanding orders. Overall, we identify ''supply risk'' as an important cause of the bullwhip effect.