IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v161y2015icp116-128.html
   My bibliography  Save this article

On human decision behavior in multi-echelon inventory management

Author

Listed:
  • Zhao, Yingshuai
  • Zhao, Xiaobo

Abstract

We conducted experiments in a multi-echelon inventory system with two scenarios: no information sharing and full information sharing. The results indicate that the bullwhip effect persists even after traditional causes have been excluded. Moreover, full information sharing cannot guarantee performance improvement. From a behavioral perspective, we analyze different causes of the bullwhip effect for the two scenarios with linear regression models. In addition, we find that the attitudes on two important inventory factors (the on-hand inventory and the stockout) are reversed in the two scenarios. These results may provide managers with useful new ideas for improving performance.

Suggested Citation

  • Zhao, Yingshuai & Zhao, Xiaobo, 2015. "On human decision behavior in multi-echelon inventory management," International Journal of Production Economics, Elsevier, vol. 161(C), pages 116-128.
    • Handle: RePEc:eee:proeco:v:161:y:2015:i:c:p:116-128
    DOI: 10.1016/j.ijpe.2014.12.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925527314003880
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ijpe.2014.12.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. AJ A. Bostian & Charles A. Holt & Angela M. Smith, 2008. "Newsvendor "Pull-to-Center" Effect: Adaptive Learning in a Laboratory Experiment," Manufacturing & Service Operations Management, INFORMS, vol. 10(4), pages 590-608, July.
    2. Gary E. Bolton & Axel Ockenfels & Ulrich W. Thonemann, 2012. "Managers and Students as Newsvendors," Management Science, INFORMS, vol. 58(12), pages 2225-2233, December.
    3. Joel H. Steckel & Sunil Gupta & Anirvan Banerji, 2004. "Supply Chain Decision Making: Will Shorter Cycle Times and Shared Point-of-Sale Information Necessarily Help?," Management Science, INFORMS, vol. 50(4), pages 458-464, April.
    4. Rashi Glazer & Joel H. Steckel & Russell S. Winer, 1992. "Locally Rational Decision Making: The Distracting Effect of Information on Managerial Performance," Management Science, INFORMS, vol. 38(2), pages 212-226, February.
    5. Awi Federgruen & Paul Zipkin, 1984. "Computational Issues in an Infinite-Horizon, Multiechelon Inventory Model," Operations Research, INFORMS, vol. 32(4), pages 818-836, August.
    6. Rachel Croson & Karen Donohue, 2002. "Experimental Economics and Supply-Chain Management," Interfaces, INFORMS, vol. 32(5), pages 74-82, October.
    7. Daniel C. Feiler & Jordan D. Tong & Richard P. Larrick, 2013. "Biased Judgment in Censored Environments," Management Science, INFORMS, vol. 59(3), pages 573-591, January.
    8. Xuanming Su, 2008. "Bounded Rationality in Newsvendor Models," Manufacturing & Service Operations Management, INFORMS, vol. 10(4), pages 566-589, May.
    9. Hau L. Lee & V. Padmanabhan & Seungjin Whang, 1997. "Information Distortion in a Supply Chain: The Bullwhip Effect," Management Science, INFORMS, vol. 43(4), pages 546-558, April.
    10. Lurie, Nicholas H. & Swaminathan, Jayashankar M., 2009. "Is timely information always better? The effect of feedback frequency on decision making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 108(2), pages 315-329, March.
    11. Sterman, John D., 1989. "Misperceptions of feedback in dynamic decision making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 43(3), pages 301-335, June.
    12. Rachel Croson & Karen Donohue, 2006. "Behavioral Causes of the Bullwhip Effect and the Observed Value of Inventory Information," Management Science, INFORMS, vol. 52(3), pages 323-336, March.
    13. Elahi, Ehsan & Lamba, Narasimha & Ramaswamy, Chinthana, 2013. "How can we improve the performance of supply chain contracts? An experimental study," International Journal of Production Economics, Elsevier, vol. 142(1), pages 146-157.
    14. Srinagesh Gavirneni & Yusen Xia, 2009. "Anchor Selection and Group Dynamics in Newsvendor Decisions---A Note," Decision Analysis, INFORMS, vol. 6(2), pages 87-97, June.
    15. Fangruo Chen, 1999. "Decentralized Supply Chains Subject to Information Delays," Management Science, INFORMS, vol. 45(8), pages 1076-1090, August.
    16. U Benzion & Y Cohen & R Peled & T Shavit, 2008. "Decision-making and the newsvendor problem: an experimental study," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(9), pages 1281-1287, September.
    17. Ancarani, A. & Di Mauro, C. & D'Urso, D., 2013. "A human experiment on inventory decisions under supply uncertainty," International Journal of Production Economics, Elsevier, vol. 142(1), pages 61-73.
    18. Andrew J. Clark & Herbert Scarf, 2004. "Optimal Policies for a Multi-Echelon Inventory Problem," Management Science, INFORMS, vol. 50(12_supple), pages 1782-1790, December.
    19. Gary E. Bolton & Elena Katok, 2008. "Learning by Doing in the Newsvendor Problem: A Laboratory Investigation of the Role of Experience and Feedback," Manufacturing & Service Operations Management, INFORMS, vol. 10(3), pages 519-538, September.
    20. John D. Sterman, 1989. "Modeling Managerial Behavior: Misperceptions of Feedback in a Dynamic Decision Making Experiment," Management Science, INFORMS, vol. 35(3), pages 321-339, March.
    21. Wu, Diana Yan, 2013. "The impact of repeated interactions on supply chain contracts: A laboratory study," International Journal of Production Economics, Elsevier, vol. 142(1), pages 3-15.
    22. Maurice E. Schweitzer & Gérard P. Cachon, 2000. "Decision Bias in the Newsvendor Problem with a Known Demand Distribution: Experimental Evidence," Management Science, INFORMS, vol. 46(3), pages 404-420, March.
    23. Machuca, José A. D. & Barajas, Rafael P., 2004. "The impact of electronic data interchange on reducing bullwhip effect and supply chain inventory costs," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 40(3), pages 209-228, May.
    24. Li Chen & A. Gürhan Kök & Jordan D. Tong, 2013. "The Effect of Payment Schemes on Inventory Decisions: The Role of Mental Accounting," Management Science, INFORMS, vol. 59(2), pages 436-451, September.
    25. Cantor, David E. & Katok, Elena, 2012. "Production smoothing in a serial supply chain: A laboratory investigation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(4), pages 781-794.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cai, Wenbo & Abdel-Malek, Layek & Hoseini, Babak & Rajaei Dehkordi, Sharareh, 2015. "Impact of flexible contracts on the performance of both retailer and supplier," International Journal of Production Economics, Elsevier, vol. 170(PB), pages 429-444.
    2. Yang, Y. & Lin, J. & Liu, G. & Zhou, L., 2021. "The behavioural causes of bullwhip effect in supply chains: A systematic literature review," International Journal of Production Economics, Elsevier, vol. 236(C).
    3. Sarkar, Sourish & Kumar, Sanjay, 2015. "A behavioral experiment on inventory management with supply chain disruption," International Journal of Production Economics, Elsevier, vol. 169(C), pages 169-178.
    4. Rahal, Imen & Elloumi, Abdelkarim, 2022. "The analysis of the Bullwhip effect on the supply chain management of perishable products," MPRA Paper 117992, University Library of Munich, Germany.
    5. De, Arijit & Mogale, D.G. & Zhang, Mengdi & Pratap, Saurabh & Kumar, Sri Krishna & Huang, George Q., 2020. "Multi-period multi-echelon inventory transportation problem considering stakeholders behavioural tendencies," International Journal of Production Economics, Elsevier, vol. 225(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yang, Y. & Lin, J. & Liu, G. & Zhou, L., 2021. "The behavioural causes of bullwhip effect in supply chains: A systematic literature review," International Journal of Production Economics, Elsevier, vol. 236(C).
    2. Karen Donohue & Özalp Özer, 2020. "Behavioral Operations: Past, Present, and Future," Manufacturing & Service Operations Management, INFORMS, vol. 22(1), pages 191-202, January.
    3. Castañeda, Jaime Andrés & Gonçalves, Paulo, 2018. "Ordering behavior in a newsstand experiment," International Journal of Production Economics, Elsevier, vol. 197(C), pages 186-196.
    4. Özalp Özer & Yanchong Zheng & Yufei Ren, 2014. "Trust, Trustworthiness, and Information Sharing in Supply Chains Bridging China and the United States," Management Science, INFORMS, vol. 60(10), pages 2435-2460, October.
    5. Arunachalam Narayanan & Brent B. Moritz, 2015. "Decision Making and Cognition in Multi-Echelon Supply Chains: An Experimental Study," Production and Operations Management, Production and Operations Management Society, vol. 24(8), pages 1216-1234, August.
    6. Strohhecker, Jürgen & Größler, Andreas, 2013. "Do personal traits influence inventory management performance?—The case of intelligence, personality, interest and knowledge," International Journal of Production Economics, Elsevier, vol. 142(1), pages 37-50.
    7. Castañeda, Jaime Andrés & Brennan, Mark & Goentzel, Jarrod, 2019. "A behavioral investigation of supply chain contracts for a newsvendor problem in a developing economy," International Journal of Production Economics, Elsevier, vol. 210(C), pages 72-83.
    8. Yufei Ren & Rachel Croson, 2013. "Overconfidence in Newsvendor Orders: An Experimental Study," Management Science, INFORMS, vol. 59(11), pages 2502-2517, November.
    9. Kalakbandi, Vinay Kumar, 2018. "Managing the misbehaving retailer under demand uncertainty and imperfect information," European Journal of Operational Research, Elsevier, vol. 269(3), pages 939-954.
    10. Cantor, David E. & Katok, Elena, 2012. "Production smoothing in a serial supply chain: A laboratory investigation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(4), pages 781-794.
    11. Song-Hee Kim & Jordan Tong & Carol Peden, 2020. "Admission Control Biases in Hospital Unit Capacity Management: How Occupancy Information Hurdles and Decision Noise Impact Utilization," Management Science, INFORMS, vol. 66(11), pages 5151-5170, November.
    12. Li Chen & A. Gürhan Kök & Jordan D. Tong, 2013. "The Effect of Payment Schemes on Inventory Decisions: The Role of Mental Accounting," Management Science, INFORMS, vol. 59(2), pages 436-451, September.
    13. Wang, Xun & Disney, Stephen M., 2016. "The bullwhip effect: Progress, trends and directions," European Journal of Operational Research, Elsevier, vol. 250(3), pages 691-701.
    14. Stewart Robinson & Stavrianna Dimitriou & Kathy Kotiadis, 2017. "Addressing the sample size problem in behavioural operational research: simulating the newsvendor problem," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(3), pages 253-268, March.
    15. Paulo Gonçalves & Mohammad Moshtari, 2021. "The impact of information visibility on ordering dynamics in a supply chain: a behavioral perspective," System Dynamics Review, System Dynamics Society, vol. 37(2-3), pages 126-154, April.
    16. Nils Rudi & David Drake, 2014. "Observation Bias: The Impact of Demand Censoring on Newsvendor Level and Adjustment Behavior," Management Science, INFORMS, vol. 60(5), pages 1334-1345, May.
    17. Michael Becker‐Peth & Kai Hoberg & Margarita Protopappa‐Sieke, 2020. "Multiperiod Inventory Management with Budget Cycles: Rational and Behavioral Decision‐Making," Production and Operations Management, Production and Operations Management Society, vol. 29(3), pages 643-663, March.
    18. Yingshuai Zhao & Xiaobo Zhao & Zuo-Jun Max Shen, 2016. "On learning process of a newsvendor with censored demand information," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(9), pages 1200-1211, September.
    19. Diego D’Urso & Ferdinando Chiacchio & Evangelia Demerouti, 2021. "Measuring How Decision Support Systems Improve Newsvendors’ Performance: The Subjects’ Version," Sustainability, MDPI, vol. 13(18), pages 1-16, September.
    20. Nelson Lau & J. Neil Bearden, 2013. "Newsvendor Demand Chasing Revisited," Management Science, INFORMS, vol. 59(5), pages 1245-1249, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:161:y:2015:i:c:p:116-128. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.