How human behaviour amplifies the bullwhip effect. A study based on the beer distribution game online

The bullwhip effect is a source of inefficiencies in supply chain performance. Since Forrester (1958) discovered that demand variability increases upstream from customer to supplier, extensive research has focused on identifying causes of the effect and on providing measures for reducing its impact. While a number of different causes have been found, the role that human behaviour plays in the bullwhip effect is still overlooked. After a literature survey of known causes for the bullwhip effect, this article describes the beer distribution game online, which is a web-based simulation of a supply chain with four tiers. Results of this simulation (with, so far, more than 4000 people taking part) allow for the first time the analysis of how humans perform as a partner in a supply chain compared with simple agent-based strategies. The analysis shows that aspects of human behaviour need to be recognised as further amplifying the bullwhip effect. Furthermore, it is proven that information exchange beyond passing on orders reduces the bullwhip effect. Nevertheless, humans act as obstacles for information flow in supply chains in practice. Readers familiar with the bullwhip effect may want to skip the first section; those knowing the beer distribution game, section 2.1.