REINFORCEMENT LEARNING IN SUPPLY CHAINS

Abstract

Effective management of supply chains creates value and can strategically position companies. In practice, human beings have been found to be both surprisingly successful and disappointingly inept at managing supply chains. The related fields of cognitive psychology and artificial intelligence have postulated a variety of potential mechanisms to explain this behavior. One of the leading candidates is reinforcement learning. This paper applies agent-based modeling to investigate the comparative behavioral consequences of three simple reinforcement learning algorithms in a multi-stage supply chain. For the first time, our findings show that the specific algorithm that is employed can have dramatic effects on the results obtained. Reinforcement learning is found to be valuable in multi-stage supply chains with several learning agents, as independent agents can learn to coordinate their behavior. However, learning in multi-stage supply chains using these postulated approaches from cognitive psychology and artificial intelligence take extremely long time periods to achieve stability which raises questions about their ability to explain behavior in real supply chains. The fact that it takes thousands of periods for agents to learn in this simple multi-agent setting provides new evidence that real world decision makers are unlikely to be using strict reinforcement learning in practice.