Trust and Inventory Replenishment Decisions: An Experimental Investigation in Serial Supply Chains

Abstract

Trust has been identified as a significant role-playing factor guarding supply chains against over-ordering and hoarding behavior, high inventory levels, high transaction costs, and poor customer satisfactions. Previous research addressed trust in supply chain mostly with the aid of surveys, interviews and field data analysis. Using an extended, computerized version of the Beer distribution Game, this paper examines the relationship between trust and inventory replenishment in customer-supplier relationship. To measure trust, a multi-round trust measurement mechanism is proposed, based on questionnaires to be filled at the beginning of each round by suppliers and customers. Correlation analysis is preformed to assess the relationship between trust and inventory replenishment decision. Results show that customer trust in supplier is negatively associated with overall mean order quantity and overall mean order time intervals for customers. Although, no significant correlation is found between supplier trust in customer and inventory replenishment decision indicators, results show a negative correlation between supplier trust in customer, overall mean standard deviation of order quantity, and overall mean standard deviation of order time intervals. Moreover, results indicate that both trust types evolve over time and that they play a significant role in the dynamics of customer-supplier relationship.