An Experimental Investigation of the Effects of Supply Risk on Supply Chain Performance

We present a series of controlled human experiments investigating the impact of supply risk on buyers’ inventory management. The experiments focus on one specific source of SC risk, namely stochastic lead times, within the framework of the “beer game”. Specifically, we study the impact of stochastic lead times on supply chain performance and on the formation of the bullwhip effect. Next, the impact of players’ SCM skills and game experience is investigated. Two between subject treatments were run, a standard beer game (SBG) and a beer game with stochastic lead times (SLT). A total of 104 MBA students and 24 purchasing managers participated. Results show that SLT gives rise to higher costs and a more marked bullwhip effect than the SBG. Both effects decrease with experience in the game. However, they do not disappear, even when realmanagers are involved in the game.