Title: Replenishment behaviour in sequential supply chains

Authors: Amin Kaboli; Rémy Glardon; Nicolas Zufferey; Naoufel Cheikhrouhou

Addresses: Laboratory for Production Management and Processes, Swiss Federal Institute of Technology at Lausanne (EPFL), CH-1015 Lausanne, Switzerland ' Laboratory for Production Management and Processes, Swiss Federal Institute of Technology at Lausanne (EPFL), CH-1015 Lausanne, Switzerland ' GSEM – Geneva School of Economics and Management, University of Geneva, Boulevard du Pont-d'Arve 40, 1211 Geneva 4, Switzerland ' Geneva School of Business Administration, HES-SO University of Applied Sciences of Western Switzerland, Tambourine 17, 1227 Carouge, Switzerland

Abstract: Inventory managers do not predominantly follow normative optimisation models. At best, they introduce a level of bounded rationality in their inventory replenishment decisions. This paper examines the behaviour of inventory decision-makers under continuous review in a decentralised supply chain, using an experimental approach with unknown market demand and local information availability. The analysis reveals that not only the magnitude and the variability of order quantity tend to be larger, but also that the order-time intervals is lengthen and highly variable while moving upstream along the supply chain. The role of the inventory managers' replenishment decisions on the echelon holding, backorder, and total costs, is also investigated. Finally, a normative model is designed and its solutions are compared to the experimental results. It is observed that humans do not operate in a perfectly optimal way, but are generally reluctant to risk increasing backorder costs and reducing inventory carrying cost, even if this would lead to lower total cost.

Keywords: behavioural operations management; supply chain; multi-echelon network; laboratory experiment; inventory management; cost computation; optimisation; simulation.

DOI: 10.1504/IJLSM.2019.098322

International Journal of Logistics Systems and Management, 2019 Vol.32 No.3/4, pp.322 - 345

Received: 05 Apr 2017
Accepted: 20 Nov 2017
Published online: 14 Mar 2019 *

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