Impact of metric-alignment on supply chain performance: a behavioral study

Abstract

PurposePrevious research has shown that firms are struggling to incorporate collaboration among supply chain partners. This paper presents a new approach to incorporate collaboration using metric-alignment. The analysis provides key insights regarding the usefulness of this approach to synchronize decision-making that leads to reduced bullwhip effect, less backordering and lower supply chain costs.Design/methodology/approachThis research is based on a large-scale behavioral study comprising 556 participants in multi-echelon supply chain games. Supply chain decisions from these experiments are evaluated to study the impact of metric-alignment on managerial decision-making and the corresponding effects on the overall supply chain performance.FindingsResults show that the metric-alignment approach offers an informal and self-enforced governance mechanism that changes managerial decision-making behaviors and improves supply chain performance. Results also show this approach to yield operational and financial benefits for all supply chain partners in the form of reduced bullwhip effect, less backordering and lower supply chain costs.Originality/valueThis is the first behavioral study of its kind that evaluates a new approach to incorporate collaboration in supply chains using metric-alignment. This approach avoids the shortcomings of current industry practices of using monetary penalties, such as on-time in-full (OTIF) mandates in supply contracts. The study shows that metric-alignment approach can improve overall supply chain performance while offering mutually beneficial rewards for all supply chain partners.