Review of Bullwhip Effect in Supply Chain Based on Behavioral Operations

The bullwhip effect badly affects the efficiency of supply chain. Based on the rational agent hypothesis, researchers have studied causes and mitigation strategies of the bullwhip effect sufficiently from operation management, contract theory, game theory and principal theory. Demand signal processing, limited supplying, lot-for-lot orders and price volatility are the main factors that cause bullwhip effect. Defects in coordination, distribution of benefits and structure of supply chain also affect bullwhip. Behavioral factors are not included in these theories. Individual decision bias and social preferences can also cause the bullwhip effect. Individual decision bias, including underestimation, overreaction, bounded rationality, anchoring and adjustment, can have impacts on bullwhip significantly. Trust, a kind of social preferences, can also cause bullwhip in supply chain management. At last, future research directions are pointed out.