Behavioral Causes of the Bullwhip Effect: Multinational vs. Local Supermarket Retailers

Abstract

Managers' perception of extra days of product ordering characterises behavioral causes of the bullwhip effect that is not yet addressed so far in literature. The study therefore investigates and compares behavioral causes of the bullwhip effect within-and between multinational and local supermarkets in a three-echelon retail chain. Retail chain stock replenishment practices embodied in a survey was distributed to managers of supplier firms, wholesale distribution centres and small retail stores in Indonesia. The data was analysed using ANOVA and post-hoc test. Results show a significant mean difference in extra days of ordering for both MSCs and LSCs. The small retail stores' perceived extra days of ordering are significantly more than what the supplier firms order upstream. Wholesale DC of both chains experiences no such effect. The study helps managers to deepen their understanding of extra days of ordering practice that is likely to be influenced by human behavior leading to the very bullwhip effect. Further, realising its negative impact on the chain performance, they need to carefully orchestrate their extra ordering practices.