{"id":1164,"date":"2018-03-23T18:03:23","date_gmt":"2018-03-23T18:03:23","guid":{"rendered":"http:\/\/mitmgmtfaculty.mit.edu\/jsterman\/?page_id=1164"},"modified":"2018-04-05T13:25:03","modified_gmt":"2018-04-05T13:25:03","slug":"imnothoarding","status":"publish","type":"page","link":"https:\/\/mitmgmtfaculty.mit.edu\/jsterman\/imnothoarding\/","title":{"rendered":""},"content":{"rendered":"

“I’m not hoarding, I’m just stocking up before the hoarders get here” Behavioral causes of phantom ordering in supply chains<\/h2>
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Sterman, J. and G. Dogan (2015).\u00a0\"I'm not hoarding, I'm just stocking up before the hoarders get here.\" Behavioral causes of phantom ordering in supply chains.\u00a0Journal of Operations Management. 39-40: 6-22.<\/p>\n

DOI:\u00a0http:\/\/doi.org\/10.1016\/j.jom.2015.07.002<\/p>\n

Abstract<\/strong><\/p>\n

When suppliers are unable to fill orders, delivery times rise and customers receive less than they desire. Customers often respond by seeking larger safety stocks and by placing additional orders, often through multiple channels. Such actions cause still longer delivery times and smaller allocations, positive feedbacks that intensify scarcity and destabilize supply chains. Such phantom ordering is common in supply chains from chemicals to computers, and played a major role in the 2001 collapse of the technology bubble. Phantom ordering can be rational when multiple customers compete for limited supply. But phantom ordering may also be explained as a behavioral response to scarcity. We report an experimental study with the Beer Distribution Game exploring the role of behavioral phenomena in hoarding and phantom ordering. Hoarding and phantom ordering are never rational in the experiment because there is no horizontal competition, randomness, or capacity constraint; further, in this iimplementation, participants have common knowledge of customer demand, which is constant. Nevertheless we find a large number of participants (20%) exhibit significant hoarding and phantom ordering, boosting target inventories and orders when deliveries falter, triggering a demand bubble and reducing their financial reward. We speculate that the urge to hoard emerged early in human evolution as an adaptive response to scarce resources, and that the brain centers responsible for hoarding are likely to be distinct from the loci of economic decision making. Stress can trigger hoarding even in circumstances where it is irrational to do so. We discuss implications for supply chain design.<\/p>\n