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

40 Pages Posted: 13 Feb 2009 Last revised: 9 Apr 2009

Ying Rong

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Zuo-Jun Max Shen

University of California, Berkeley - Department of Industrial Engineering & Operations Research (IEOR)

Lawrence V. Snyder

Lehigh University - Department of Industrial and Systems Engineering

Date Written: February 8, 2009

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.

Suggested Citation

Rong, Ying and Shen, Zuo-Jun Max and Snyder, Lawrence V., The Impact of Ordering Behavior on Order-Quantity Variability: A Study of Forward and Reverse Bullwhip Effects (February 8, 2009). Available at SSRN: https://ssrn.com/abstract=1289830 or http://dx.doi.org/10.2139/ssrn.1289830

Ying Rong (Contact Author)

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

Zuo-Jun Max Shen

University of California, Berkeley - Department of Industrial Engineering & Operations Research (IEOR) ( email )

IEOR Department
4135 Etcheverry Hall
Berkeley, CA 94720
United States

Lawrence V. Snyder

Lehigh University - Department of Industrial and Systems Engineering ( email )

Harold S. Mohler Laboratory
200 West Packer Avenue
Bethlehem, PA 18015-1582
United States

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