The Impact of Information Visibility on Ordering Dynamics in a Supply Chain: A Behavioral Perspective

Abstract

Previous research on the bullwhip effect shows that information visibility – Point-Of-Sale (POS) data or supply chain partner inventory data – can reduce the amplification of orders in a supply chain. This study compiles and analyzes the data from two previous experiments with the Beer Game (Croson and Donohue, 2003, 2006) to gain insight on the specific mechanisms that decrease order amplification. By structuring the data as a panel and using a fixed-effects estimation model, we find that additional supply chain level information (e.g., POS and inventory data) leads subjects to react less aggressively to changes in their own inventory and to pay more attention to the supply line of orders placed. Furthermore, our analysis shows that such effects are more pronounced for upstream subjects. Our findings provide insight into the role that additional supply chain information play on subjects’ orders in the Beer Game.