The Impact of Ordering Behavior on Order-Quantity Variability: A Study of Forward and Reverse Bullwhip Effects

Abstract:     
We introduce the concept of the reverse bullwhip effect (RBWE), which can be caused by supply disruptions. In the RBWE, order variability increases as one moves downstream in the supply chain, and therefore the RBWE is the opposite of the classical bullwhip effect (BWE). We test our conjecture that disruptions cause the RBWE using both a live "beer game" experiment and a simulation study. In the beer game, we find that players modify their ordering behavior during disruptions, and that these modifications cause the RBWE. We confirm this cause of the RBWE under a broad range of settings using discrete-event simulation. Our results demonstrate that supply uncertainty (in the form of random disruptions) and an overweighting of the supply line cause the RBWE. They also confirm previous studies showing that demand uncertainty and an underweighting of the supply line cause the BWE. Moreover, our study provides guidance for models of operational disruptions by incorporating human reactions to disruptions.

Working Paper Series